25/02/2010 - 00:00

Phoenix a sign of rising industrial interest

25/02/2010 - 00:00

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PERTH’S industrial property market is showing signs of renewed strength and confidence, although that could be undermined by supply constraints, according to the latest market analysis from Colliers International.

Phoenix a sign of rising industrial interest

PERTH’S industrial property market is showing signs of renewed strength and confidence, although that could be undermined by supply constraints, according to the latest market analysis from Colliers International.

Colliers’ autumn 2010 Industrial Market Indicators report indicated signs of a turnaround are emerging, following a sharp drop-off in the number of transactions in the Perth industrial market throughout 2009.

According to the report, 453 industrial properties with a total value of about $447 million were sold in the 12 months to December 2009, down from 602 sales worth $735 million in 2008.

While finance provided for the purchase of industrial property was low compared to previous peaks, it rebounded from a four-year low of $572.7 million in January last year to $813.3 million in September.

Colliers International research consultancy manager Erwin Edlinger told WA Business News a recent increase in inquiry at Phoenix Business Park in Bibra Lake provided anecdotal evidence credit constraints were beginning to ease.

“We’re starting to sign some deals up in that estate, which was pretty much dead over most of 2009,” Mr Edlinger said.

“Over the last quarter we’ve seen some transactions and high levels of inquiry as well, mainly from owner occupiers who are looking to buy a site, build and then occupy.

“With the transactions starting to occur at Phoenix Business Park it’s given us the indication that the credit issue is starting to improve slightly.”

The report indicates Perth’s industrial market avoided a major correction throughout the financial crisis because the low level of institutional ownership of large industrial properties in Perth had effectively shielded the market from the turmoil in other locations.

Mr Edlinger said high net worth local investors were holding onto industrial land assets in anticipation of future growth.

“We haven’t had the portfolio fire sales that the east coast had because we’re fundamentally a different type of market,” Mr Edlinger said.

“A lot of the stock is held by high net worth individuals who weren’t under duress during the global financial crisis.

“Their equity positions are fairly strong, so they weren’t under any duress to offload assets; unlike some of the institutions on the east coast that needed to offload a lot of their assets to get their debt levels down.”

He said the Gorgon announcement in September last year had resulted in a renewed confidence in the market.

“Tenants have shown a greater level of certainty, they’re looking at the long-term economic outlook in a more positive way now, so they’re more inclined to sign up leases,” Mr Edlinger said.

“The service industries, which is one of the key drivers for industrial land and occupy the smaller tenancies, have picked up; their business conditions have improved so they’ve started to absorb some of that excess that is around at the moment.

“We’re seeing a lot of traction in that lower end of the market. There is still excess stock so it’s going to take a while for it to be absorbed.”

But Mr Edlinger said the industrial market was still constrained by supply, especially for larger lots 2,000 square metres and above.

“Supply constraints have been around for a while, the lots just aren’t around, so Phoenix business Park is providing some easing to that supply issue, but apart from the Goodman development out at Hazelmere there’s just not any real places for that sort of demand to be satisfied,” he said

“Hope Valley is an interesting one because it’s basically hinging on the development of the port, so until that port is created and there is sufficient infrastructure built to allow those occupiers to effectively operate, tenants are just not going to commit.

“With Hazelmere, it’s almost a logical extension to Welshpool and Kewdale, the infrastructure is already there.”

However, there was a high level of activity in investment stock at the larger end of the market – industrial land valued from $5 million to $10 million.

“There hasn’t been a high amount of transactions because there is limited stock but we’ve seen a lot of evidence of investors being in the market actively looking for decent investment stock,” Mr Edlinger told WA Business News.

“There is limited available stock around, but it’s definitely pretty buoyant in investment demand.”

With demand firming, rents are expected to remain stable over the next six months, with incentives remaining, mostly at the smaller end of the market with its excess of supply.

 

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