10/07/2007 - 22:00

Land shortage prompts rise in rents

10/07/2007 - 22:00

Bookmark

Upgrade your subscription to use this feature.

Perth’s industrial sector has moved into top gear in the past 12 months, posting rental growth close to 50 per cent in secondary markets and sparking high levels of development activity.

Land shortage prompts rise in rents

Perth’s industrial sector has moved into top gear in the past 12 months, posting rental growth close to 50 per cent in secondary markets and sparking high levels of development activity.

According to Savills’ latest Perth industrial market overview, secondary areas including Balcatta, Malaga, Forrestfield and Henderson have experienced the biggest rental price rise, 47.6 per cent over the past 12 months.

This figure eclipses rental increases of 36.7 in the core industrial areas of Osborne Park, Kewdale, Welshpool and Canning Vale for the same period.

Over the entire sector, rents rose by 42 per cent.

In total, industrial leasing activity has risen a modest 13 per cent in the year to March, with more than 365,000 square metres of space leased.

Transport and logistics tenants are dominating the activity, taking 214,914sq m of space, or 59 per cent of total leases, with Coles, Woolworths and Patrick BWL the main players.

Savills research analyst Alyson Martinovich said rents in core industrial areas were expected to keep rising throughout 2007 because of a shortage of land and investment properties.

New developments could also be hit with higher rents as the rising costs of land and building materials were passed on to tenants, she said.

“The upward pressure on rental growth will flow through to secondary grade stock over a more extended period, as owners consider re-leasing or selling with vacant possession to take further advantage of the potentially higher prices they can achieve,” Ms Martinovich told WA Business News.

The report found the lack of investment stock had had a dampening effect on sales activity, which was sluggish in the March quarter and down 8 per cent over the previous 12 months.

Private investors were the most active investor group in the year to March 2007, buying 32 per cent of the stock worth more than $1 million, followed by industrial funds with 28 per cent.

While established stock is becoming a rare commodity in Perth, the value of new developments has increased by 50 per cent to $408 million in the year to December 2006.

Ms Martinovich said developers of factories and warehouses had been the most significant contributors.

“Perth typically develops new industrial accommodation (as opposed to renovating or extending existing accommodation) as demand for greater cubic capacity requires higher truss heights than that available in the older buildings, which tend to be 4.5 metres to five metres in most cases,” she said.

Savills has identified approximately 173,000sq m of stock currently under construction, 130,300sq m of which is due for completion in 2008, and a further 117,000sq m in the pipeline.

Of those projects due for completion next year, BGC’s 50,000sq m brick-works and the 73,000sq m Coles Distri-bution Centre at Perth Airport are the largest.

Ms Martinovich said the high level of construction activity was expected to continue this year, buoyed by substantial development in Forrestdale Industrial Park and Cockburn Commercial Park.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

Subscription Options