19/08/2010 - 00:00

Pressure as industrial land supply tightens

19/08/2010 - 00:00

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DEMAND for industrial land in Perth has been tipped to rise ahead of the resources sector’s next growth cycle, while a shortage of supply is expected to increase upwards pressure on industrial rents and land values throughout this year and next.

Pressure as industrial land supply tightens

DEMAND for industrial land in Perth has been tipped to rise ahead of the resources sector’s next growth cycle, while a shortage of supply is expected to increase upwards pressure on industrial rents and land values throughout this year and next.

Research by property analysts Jones Lang LaSalle for the June quarter indicated the lack of supply in the industrial market was a result of reduced levels of activity for the majority of 2009.

During the past 12 months, 31,945 square metres of industrial space have been added to the market, with 111,362sqm absorbed by tenants in that same period.

There is currently 62,800sqm under construction, but only 22,100sqm of that space is due for completion before the end of the year. Of that space, 61 per cent has been pre-committed.

The only major project completed during the June quarter was the Detroit Diesel facility at Hazlemere’s Stockyards industrial estate, which supplied 10,000sqm to market.

The total expected supply of 32,200sqm of industrial land supplied to market in 2010 will be the lowest on record.

Future supply also remains limited, with only 14,500sqm of projects in planning stages for 2011 development.

Current industrial projects under construction include a 13,000sqm facility in Kewdale for Kimberley Clarke, a 9,139sqm facility at Rutland Avenue in Welshpool, 24,400sqm at stage two of the Quill Way Factory in Henderson, and 16,295sqm at Stockyards industrial estate in Hazelmere for Toll Ipec.

In terms of demand, Jones Lang LaSalle reported there was 21,100sqm of take-up recorded during the quarter.

Retailer Target took up 9,139sqm of space in Welshpool, building products and electrical goods firm JH Wilberforce tenanted 6,500sqm in Malaga, and lighting specialists Gerard Industries leased 5,500sqm, also in Malaga.

Jones Lang LaSalle research and consulting manager Andrew Bouhlas, said demand was likely to accelerate as economic conditions improved in Western Australia, and the lack of readily available industrial space would place pressure on existing stock.

“The supply-demand imbalance is likely to rear its head again, if you look at how much supply is coming online and how strong demand has been over the first half of this year, there is definitely more demand than there is supply,” Mr Bouhlas told WA Business News.

“That’s going to place upwards pressure on both land values and rents.

“If you look at where the take-up is, the manufacturing industry has been strong, and the transport and logistics industry has been strong.

“Transport, logistics and warehousing land needs will increase with demand from China and resource projects increasing. Anything related to resources projects is likely to benefit.”

Mr Bouhlas said demand was largely centred around well-established industrial areas in Welshpool and Kewdale.

“That’s been the main area of supply over the last 18 to 24 months, basically because it’s close to the airport and close to the main arterial transport routes and linkages,” he said.

Prime rents in the north and south were, on average, $120/sqm and $109/sqm, respectively over the June quarter, while in the east, where demand is highest, there was a slight increase of 0.8 per cent across the board.

Property and construction consulting firm Davis Langdon said the market conditions had resulted in an attractive environment for the state’s industrial developers.

Davis Langdon managing director Mark Beattie said the market was slowly stabilising and returning to a positive growth outlook.

“There is still very little activity in new industrial projects coming on stream, and with low activity levels – both in this and other sectors – construction prices remain extremely competitive,” he said.

“This has created a very attractive environment for developers who can construct at low capital cost and sell or lease into a market.”

 

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