Smaller sales dominate industrial market

Increasing speculation over the health of the residential property market is adding to the growth in investors and owner-occupiers buying small industrial properties.

Research by Savills shows that approximately 75 per cent of industrial sales in 2004 were to owner-occupiers or private investors, something director of industrial sales and leasing Max Jones attributes to attractive yields and interest rate levels.

“The interest in industrial property has been pretty consistent, but with interest rate levels over the last 18 months, industrial property has been reinforced as a legitimate option,” Mr Jones said.

“Parties that would have previously leased have decided to buy through things like super funds, and a lot of people are also taking the attitude that although residential property can give you a lump sum when you sell, industrial properties yield well above what residential does.”

He said demand for smaller industrial properties of up to $1 million far outstripped supply.

“Owners can achieve top of the range prices in this price bracket and we have a large number of purchasers seeking premises of up to 1,500 square metres, which we are unable to satisfy at this stage,” Mr Jones said.

“We are aware of purchasers who have just missed out on securing properties as they have acted too slowly and are now ready to act quickly when the opportunity arises.”

Burgess Rawson senior industrial sales negotiator Chad Henville said the strength of the industrial market was linked to the strength of the resources sector in Western Australia.

“There are a lot of associated industries that run of the back of resources,” he said.

Mr Henville added that 95 per cent of buyers were owner-occupiers, but that there had recently been a glut of investors trying to get in to the industrial market.

Knight Frank director of investment strategy David Rees said the industrial market was recording the best performance in a decade and that values had risen sharply.

He said investors had shifted their investment focus following a 30 per cent wealth drop in equity markets after 2000.

“The amount of money going to property is massive, and demand is much greater than supply,” Dr Rees said.

“Commercial property has been undervalued for a long time – it’s high return and low risk, and more people are realising [that].”