Although LandCorp is charged with supplying industrial land, purchasers are making substantial profits through sales, subdivision and increasing rents.
Although LandCorp is charged with supplying industrial land, purchasers are making substantial profits through sales, subdivision and increasing rents.
Western Australia’s booming economy, infrastructure such as the Perth-Mandurah railway line and a strong residential sector are attributed as underpinning the industrial sector.
A 45 per cent increase in industrial construction over 2002 and 2003 has continued over the past two years.
Burgess Rawson director of commercial and industrial agency Andrew McKerracher said that, for an industrial estate to be truly successful in today’s market, it must be linked to an integrated transport network, including road, rail, air and sea.
“The future success of any new industrial area depends greatly on whether the market is satisfied with the level of transport infrastructure servicing each new location,” Mr McKerracher said.
“Industrial estates are being developed across the metropolitan area, and these are mainly located in the southern corridor where there are still large tracts of green field land to be developed.
“The northern and eastern corridors are in low supply of land as they are more fully developed and future estates will tend to be more of infill nature.”
Current demand has been bolstered by a strong economy and low interest rates, generally making it cheaper to own rather than lease property, thereby creating the situation where owner occupiers are very prominent in the market, according to Mr McKerracher.
“It’s the same old story all over again, demand is high but there is simply not enough land available to cater for it – some slack will be picked up with some upcoming releases but that will do little to relieve existing pressure on rental, construction and land values,” he said.
Savills industrial director Max Jones said everyone had been a bit caught out by how strong the industrial market had been in the past few years.
“The owner occupier sector is really driving the market and that isn’t going to change while rates remain where they are,” Mr Jones said.
“The industrial market in Perth is very much two tiered – the majority of industrial property is purchased by smaller owner occupiers and private investors, where demand for stock in the $500,000 to $1.5 million range is strong.”
He added that private investors and owner occupiers made up 81 per cent of purchasers of industrial land in 2004, with developers comprising 11 per cent and trusts 6 per cent.
In the year to 2004, approximately $251 million worth of property under $5 million was exchanged, and approximately $120 million worth of property over $5 million was transacted.
In relation to the leasing market, in the year to March 2005, over 175,000 square metres of industrial accommodation was leased, IT taking up approximately 24 per cent, construction and related services leasing approximately 18 per cent, and engineering 13 per cent.
“Rents have seen growth recently in new industrial developments, primarily due to significant increases in construction costs, which should flow through to existing prime and secondary grade properties,” Mr Jones said.