Squeeze on industrial land

The performance of Western Australia’s industrial property market during the past 12 months has more than matched the commercial sector, with record sales and rents being generated, although prices are tipped to level out as more supply comes on to the market in 2008.

Research from property agents Knight Frank shows industrial land values increased by 75 per cent in the year to December 2007, compounded by tight supply.

While property pundits would be forgiven for assuming nothing would top the $61 million SAS Global paid in May for the OneSteel site in North Fremantle, Goodman International surpassed it six months later with its acquisition of the former WA Meat Authority site in Hazelmere, for a record $70 million.

Goodman announced in November that it had acquired the 34-hectare parcel off Bushmead Road, and will develop it into one of Perth’s premier industrial estates, adding to its $60 million WA portfolio.

Meanwhile, SAS Global appears to be holding on to the 3.1ha OneSteel site it purchased from developer Michael Hodgson for $1,968/sqm, preferring to lease it while drawing up plans for a luxury residential complex.

Other deals of note this year include boutique developer Linc Property’s acquisition of a 40ha site at Landsdale for $60.5 million in October, which was two-thirds sold at the time, and PrimeWest’s $57 million purchase in Bibra Lake in June.

The Bibra Lake site will become one of Primewest’s largest development projects, when it begins construction of a light industrial/office park, and a number of bulky goods units and retail showrooms this year.

Amcor will lease back its existing 14,000sqm factory and small office complex.

While some of last year’s big transactions rivaled prices being achieved on St Georges Terrace, the market as a whole is two-tiered, according to property group Savills.

The agency’s most recent industrial market overview showed that about $350 million, or 54 per cent, of the total value of industrial properties transacted to September last year were valued between $1 million and $5 million.

It also showed a decrease of 4 per cent in the value of industrial property transactions in the year to September, down from $880 million to $678 million.

This was below the three-year average of $706 million.

Colliers International industrial director Wayne Chorley said that, while rents and land values had risen dramatically last year, the market was expected to soften in 2008.

“I don’t think that will continue because there is a fair bit of supply coming on to the market this year,” he said.

While traditional industrial areas, including Canning Vale, Kewdale Welshpool, Balcatta and Osborne Park, recorded the greatest share of new leases last year, new developments are mooted for Wangara, Forrestdale and Port Kennedy, among others.

One of these is Neerabup’s Meridian Park, a 400ha industrial estate being developed by LandCorp and the City of Wanneroo.

Stage one will come on to the market next month, with 21 lots ranging from 1,500 to 9,000sqm.

A further 12ha are expected to be released later in the year.

Goodman International is also developing an industrial estate in Hazelmere, on the former Meat Authority site.

The 34ha site will contain purpose-built facilities for tenants.

Meanwhile, the Phoenix Business Park at Bibra Lake is expected to come on to the market in June this year, with 100 lots available across 34ha.

“That level of supply will definitely create a leveling off in land prices, although the demand is still there,” Mr Chorley said.

He said sales activity was also expected to plateau this year.

“Industrial property is being very tightly held at the moment,” Mr Chorley said.

“Not too many people are disposing of their land because of rental growth. With rents having gone up by 50 per cent in the past month, owners are very reluctant to sell.”

The year’s biggest investment sale by far was Charter Hall’s $31.8 million purchase of a 45,000sqm site at 123 Kewdale Road in Kewdale, which held an office and warehouse facility.

Mr Chorley said he expected more interest in the local market from east coast institutions in 2008.

“Industrial rents and industrial yields in Perth are now the same as in Sydney,” he said.

“The big institutions are taking a broader view of the market, and they regard Perth, Sydney and Brisbane as one big industrial market.”