Leasing activity in Perth’s industrial land sector is beginning to show the first signs of recovery after a slow 2013, according to a leading sales agent, while at the same time demand from institutional investors looking to purchase freehold properties is rising to unprecedented levels.
Colliers International industrial agency director Wayne Chorley said leasing enquiry in Perth’s industrial markets had been soft since early 2013, but the first green shoots of activity popped up towards the end of the year.
“The market is just waking up a bit now – Kmart is in the marketplace for a 45,000sqm to 50,000sqm distribution centre, and it only takes a couple of those sorts of enquiries to come into the market to kickstart things and give other organisations the confidence and impetus to move as well,” Mr Chorley told Business News.
“We haven’t seen any really discernible drop in rents, but the difference in the market is that at this time last year we were anticipating industrial rents to go up.
“Now the pressure has plateaued and we’re anticipating a slight decrease in rents.”
But while demand hasn’t been high, Mr Chorley said there hadn’t been any large increase in the supply of industrial properties available for lease.
“The stuff we saw come onto the market in the past 12 months was partial sub-lease space, particularly in the mining or resources sector,” he said.
“Those rents are always going to be less because it’s all compromised.
“There’s compromised access, you have to share your amenities somehow, and you’ve got to split the power bill because in most cases it’s not separately metered, so it’s always a compromise.”
On the sales side of the market, real estate investment institutions, including Charter Hall, Lend Lease, Stockland and Dexus, all have sizeable mandates to acquire industrial property in Western Australia, Mr Chorley said.
Australian Industrial REIT, a listed entity controlled by eastern states property fund Fife Capital, spent $31.3 million in January on a pair of industrial properties in Perth’s southern suburbs, in a deal brokered by Colliers on behalf of the vendor, syndicator and developer Primewest.
The trust also picked up a trio of industrial properties in Melbourne in the transaction, which totalled $81.3 million.
The transaction is expected to settle later this week, with an initial yield of 9.3 per cent.
One of the Perth properties was the former Trailcraft factory at 99 Quill Way in Henderson, which Australian Industrial picked up for $15.5 million.
The 16,419 square metre property is currently leased to the CBI-Kentz joint venture, which holds a $2.3 billion contract for electrical and instrumentation works on Chevron’s Gorgon liquefied natural gas project.
The joint venture has another year to run on its lease, with the option to lease the site for a further 12 months.
Primewest purchased the site in 2011.
The other Perth property was the 18,235sqm Phoenix Box Plant at 23 Selkis Road, Bibra Lake, which sold for $15.8 million.
Mr Chorley said demand for similar properties across the metropolitan area was currently reaching unprecedented levels.
“There’s very strong demand for big lots in an undersupplied market,” Mr Chorley told Business News.
“Some of those requirements, they are ranging anywhere from two hectares to 15 hectares, they are major requirements for land.
“Fifteen hectares of zoned industrial land is very, very hard to find, if not impossible, especially in the traditional areas like Welshpool and Kewdale.
Mr Chorley said demand was so high that the majority of high-value industrial land sales were occurring off-market.
“They’re not going through full marketing campaigns, so you would expect yields to tighten on that basis,” he said.