28/09/2011 - 10:49

Private players reap industrial dividends amid large lot push

28/09/2011 - 10:49

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Private players reap industrial dividends amid large lot push

PRIVATE property developers are making the most of Perth’s industrial land shortage to build the profits, along with much-needed facilities, for national and multi-national tenants keen to lift their exposure to Western Australia’s economic growth.

Private developers have always played a major role in WA’s industrial property market, leaving state government authority LandCorp to focus on the less profitable large-scale land sales.

In recent times, however, the shortage of well-connected, large-scale lots adjacent to Perth’s major transport routes has spurred landowners such as Goodman, with its Stockyards Industrial Estate in Hazelmere, and Jandakot Airport owner Ascot Capital to expand into large-lot development to meet demand.

LandCorp’s general manager of industrial John Hackett said the private sector would always play a significant role in the Perth market and was an important player in the purpose-built development sector. 

Several private developers are active in the industrial market, including Michael Hodgson and the Coxon Group, which has been developing and leasing commercial properties in Perth for more than three decades.

Led by Peter and Sheldon Coxon, the group’s portfolio includes Bunnings warehouse properties in Cannington and Melville, Bridgestone Tyre’s workshop and office in Kewdale, as well as Beaurepaires’ Canning Vale outlet.

Michael Hodgson, who owns the Botanica Bar in Innaloo, is understood to have recently paid Westralia Airports Corporation $20 million for a 12-hectare parcel of freehold land near the Perth Airport.

In recent years, Goodman’s Stockyards estate and Jandakot City at Jandakot Airport have risen to prominence, luring a number of high-profile industrial tenants into purpose-built industrial properties on their estates.

Stockyards was the first large-scale, master-planned industrial estate undertaken by an institution in Perth, and it has attracted a clutch of transport and logistics tenants, including Linfox and Toll IPEC.

It’s also Perth’s largest freehold industrial estate under one title, and with Linfox’s commitment to a 10-year lease on a purpose-designed office and warehouse development at Stockyards in June, the 34ha site is full.

While the value of Stockyards’ lease deals are not known, industry analysts suggest the shortage of options in the Perth market would support solid lease deals of at least $115/sqm.

Industrial rents in Perth range from about $60/sqm to as high as $150/sqm in industrial/commercial precincts such as Osborne Park, but the average is about $105/sqm.

The industrial development at Jandakot Airport, Jandakot City, has been a key beneficiary of both the shortage of large industrial lots in Perth and Westralia Airports Corporation’s strategic shift away from property development.

Led by property director Leo Seward, Jandakot City is comprised of about 150ha of land adjacent to the airport of which about 30ha has been developed so far.

The Jandakot City tenant list includes GE Oil and Gas, CSR Viridian and Halliburton.

Jandakot City negotiates deals where it maintains ownership of the purpose-designed and built properties it develops for tenants on its estate.

Mr Seward said the estate was not subdivided, rather it secured tenants and developed sites to meet their requirements; but he put the popularity of the precinct down to the demand for land.

“We have the land and we are very flexible in the size of our land because out land is all leasehold we just cut it to suit each deal,” Mr Seward told WA Business News.

“The largest components of the rent calculation are the land area and the building cost so the more efficient the site layout is, the lower the tenant’s rent is.”

He said the shortage of large, well-located industrial land in Perth partly explained the success of Jandakot City, but its popularity was also significantly bolstered by the development of the Kwinana Freeway-Roe Highway interchange.

“Before that is was a bit of a convoluted road system to get in here (to Jandakot) and industrial users want good access,” Mr Seward said.

Rents at Jandakot City ranged from about $95/sqm to $110-plus/sqm, but Mr Seward said it depended on each tenant’s individual requirements.

The industrial sector appears to be a lucrative slice of the property market for a number of developers and landowners and continues to attract new players, with Sirona Capital recently revealing plans to develop a newly acquired 270ha parcel of land in Bullsbrook into large industrial lots.

Sirona is a private equity, corporate advisory and merchant banking firm targeting the mining, resources and real estate sectors.

Its property investments include the Myer property in Fremantle, which it plans to develop in partnership with Luke Saraceni’s Saracen Properties.

The Bullsbrook land, which has also been bought through a syndicate of Sirona and Saracen Properties, is south of Pearce airbase and will require rezoning.

Sirona said the investment was based on the shortage of: “Contiguous large-lot industrial land in the Perth metropolitan area to service industry underpinned by the strong positive outlook for the mining and resource industry in WA.”

The property syndicates have been quick to recognise the returns on industrial property in WA along with the potential rental growth.

Colliers International has forecast growth of as much as 10 per cent in the next year and, based on their latest research, investment yields are expected to hold at between 8 per cent and 9 per cent. 

And the ongoing shortage of investment-grade stock for sale, partly driven by the private developers, who hold their purpose-built projects as long-term investments, is expected to support ongoing growth in property values and rents.

Most of Perth’s major property syndicators have industrial properties as part of their portfolios, including Scope Property Group, which has recently settled on an office-warehouse asset in Collingwood Street in Osborne Park.

Director Robert Engelhard said the key for Scope was identifying properties with redevelopment potential, especially in well-established industrial areas where land values were high enough to encourage new land-uses such as office or bulky retail.

“The Collingwood property falls under the Stirling revitalisation plan, and because it’s within walking distance of the train station … we view it as a good land bank to be able to take advantage of the higher use of the site,” he said.

Mr Engelhard said Scope was always looking for multiple benefits or creating wealth through the assets.

“It needs to have a reasonable yield because that is what our investors want up-front but there also needs to be something else to it,” he said.

 

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