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Industrials enjoy records

DESPITE the GST having a strong impact on the industrial market and generally slowing activity the year saw a number of record deals, according to Chesterton International industrial sales and leasing director Ben Davies.

Mr Davies said some of the best deals occurred in the secondary industrial market as tenants and investors rushed to secure land while it was still relatively cheap.

“The trend towards secondary suburbs is mainly due to a strong demand for serviced lots in established suburbs contributing toward a significant increase in values over the past three years,” Mr Davies said.

“There is little or no industrial land left in Kewdale and Welshpool with only some minor infill projects being undertaken. A shortage exists in Osborne Park, Balcatta, Belmont and O’Connor with any redevelopment sites remaining.”

Burgess Rawson associate director Andrew McKerracher said prime industrial land in Canning Vale was selling for between $65 and $75 a square metre.

Burgess Rawson is involved in the marketing of the Malaga Industrial Park where prices ranged from about $100 to $120 per square metre. Nearby in Osborne Park prices of $375 per square metre, Balcatta at about $250 per square metre and Wangara at about $90 per square metre.

Mr McKerracher said with construction services freeing up after the GST rush, the affordability of future industrial projects should improve.

“The supply of traditional space has increased over 1999 with owner-occupiers taking advantage of low construction costs and borrowing rates,” he said.

“Scarce speculative development continues to be characterised by smaller sized developments over the metropolitan area.”

Mr Davies believes the new year will bring an increase in enquires for industrial land as yields begin to firm.

“The investment market across most of the industrial sector has been very soft since the end of the last financial year, primarily as a result of the unknown effects on business stemming from the GST and the upward pressure on interest rates.

But perhaps the most telling sign of any strengthening of the industrial market will be how the resource sector performs in 2001.

Mr Davies said there was a close correlation between the industrial sector and the resource sector. After a two year down turn data from the Chamber of Commerce and industry suggests growth in the production of metals of almost 4 per cent, while resource export earnings are expected to grow 15 per cent in 2000-01.

“These estimates suggest that industrial property may prove a disproportionately strong performer in the new financial year – and with a distinct lack of prime industrial land supply – rental and yield levels should appreciate,” he said.

Jones Lang LaSalle research analyst Frank Sorgiovanni said his research showed that new construction would remain at low levels particularly with design and construct projects.

“Leasing is likely to become a more attractive option. Any rental growth is likely to be only CPI adjusted,” Mr Sorgiovanni said.

“Already in 2000 sales have fallen 50 per cent from last year to total just over $50 million.”

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