Pressure on industrial rents

The increase in Perth industrial rents is showing no signs of easing this year in the face of soaring land values, building costs and competing land uses from commercial and retail sectors.

Rents in traditional industrial areas such as Osborne Park, Kewdale, Welshpool, Belmont and Canning Vale are being increasingly pressured by a lack of available greenfield and brown field lots for new development, in combination with competition from bulky goods and office uses.

Jones Lang LaSalle research analyst Andrew Bouhlas said in the second half of 2006, industrial rents in Perth continued to grow at above average rates, a market trend emerging in recent years.

“In the three years to December 2006, average prime existing rental growth of 28 per cent has been reported, while growth of seven per cent for the 12 months to December 2006 remains well above the five year average of 2.3 per cent,” he said.

Recent releases of land at Enterprise Park Wangara, Neerabup Industrial Estate, the emergence of the Latitude 32 industrial precinct at Hope Valley/Wattleup and the identification of other potential industrial markets to the south, is anticipated to ease some pressure on rents.

But despite this, rents in newer estates will remain largely immune, he said.

In its latest industrial market report, Savills have also forecast continued upward pressure on rents in new developments as a result of higher land values and building costs.

The agency recorded 296,743sq m of industrial accommodation leased in the year to September 2006, up four per cent on the previous year’s 285,105sq m.

It recorded 22,472sq m of leasing activity for the three months to December 2006.

It’s report revealed rents in Perth’s core industrial precinct in September 2006 ranged between $70/sq m and $90/sq m net for premium grade buildings, an increase of 8.3 per cent over the past 12 months.

Secondary industrial building rents averaged between $50/sq m and $65/sq m net in the same period.

Rents in remaining Perth industrial precincts ranged between an average of $65/sq m to $72/sq m net for prime grade buildings, and around $52/sq m to $55/sq m net for secondary industrial buildings, the report said.