Perth could miss out on a wave of investment in non-residential property, according to a national survey released by the Australian Property Institute today.
Forty-five per cent of those who responded to the survey predicted growth in non-residential property would power past that of share markets due to an increase in investment from listed and unlisted trusts.
Investors could forgo the strengthening Perth market, however, to secure bargain properties in the eastern states, according to the API.
Those surveyed said that, within two years, industrial markets in Sydney, Brisbane and Melbourne would be outpacing almost all other markets.
API Western Australian president Dennis Volk said the results indicated increased confidence in the market, but said the WA sector faced challenges.
“The real problem we face, and this survey indicates it, is that Perth is way ahead on the economic cycle compared to anyone else,” he said.
Mr Volk warned that the strength of the Perth market meant investment was likely to flow into recovering markets in the eastern states, not WA’s office sector.
“Melbourne and Sydney are swinging up the cycle and that’s where you want to be as an investor,” Mr Volk said.
He said Perth was almost at “12 on the property cycle clock”, which was a prime time to sell, not to buy; in Melbourne and Sydney, investors will, “wear a little risk to get the better return”.
Mr Volk said WA would still gain investment, however, with investors looking to balance their portfolios.
“If you put a WA asset in, you stabilise your investments because it is such a heady market here at the moment,” he said.
Nationally respondents to API’s survey expected the leading commercial markets to outperform the Consumer Price Index over the next year with an expected growth of 3.4 per cent above CPI in Sydney’s industrial markets and 2.5 per cent growth above inflation in the city’s CBD commercial market.
Melbourne, however, elicited low expectations for growth from survey respondents, with 55 per cent expecting a fall in effective commercial rates in the city within six months.
Against this national backdrop, Mr Volk said, Perth was performing well, with the lowest level of incentives, where clients are offered a period of the lease rent free, of any commercial market.
Half of survey respondents based in Perth reported incentives under 9 per cent in CBD prime properties, with a third reporting the same in A-grade buildings; there were no reported incentives above 29 per cent in WA.
In contrast, 7 per cent of Sydney respondents reported incentives of more than 30 per cent, and 77 per cent reported incentives of between 20-29 per cent.
Melbourne also had a high level of incentives with 69 per cent of respondents reporting 20-29 per cent in prime properties, climbing to 83 per cent with A-grade offices.
While Mr Volk said there had been a slight uptick in incentives locally, he said it was a standard part of the market.
“At the moment most incentives are between 5 and 10 per cent but you if you have a 30,000sq m tenant about to take a lease for 20 years, you will give something away to lock them in,” he said.
The API also said that The Property Directions survey found retail was the worst performing sector in major markets and industrial property had the greatest potential.