Supply in Perth’s industrial market is expected to more than double this year, yet pre-commitments are high and take-up is expected to be restricted, according to Jones Lang LaSalle’s market report for the fourth quarter of 2007.
In total, 259,100 square metres of industrial projects are under construction at present, with some projects reaching pre-commitments of 85 per cent.
For 2008, a record 290,400sqm of new supply is forecast to come on line, more than doubling last year’s level of 112,900sqm.
However, much of the increase will be made up of stock from delayed projects that were originally due for completion in 2007.
Last year’s gross take-up of stock (177,002sqm) was below expected levels due to these delays.
Tenant demand for industrial space remained strong last quarter, although late deliveries and a lack of supply restricted take-up.
Just 18,400sqm of stock was absorbed during the December quarter.
Take-up in 2008 is expected to continue to be constrained by a lack of supply, compounded by strong client demand for large sites between 5,000sqm and 10,000sqm.
Almost three-quarters of take-up last year, for sites over 3,000sqm, was accounted for by the manufacturing and transport and logistics sectors, with the latter acquiring almost half of supply.
These sectors are expected to continue to dominate the market this year.
Rental growth, driven by scarcity of stock, continued to be strong for all property grades during the last quarter of 2007.
During the 12 months to December, prime rents grew by more than 15 per cent, making Perth the fastest growing market nationally.
Rents were highest in the eastern region ($133/sqm on average), followed by the northern ($121/sqm) and southern ($114/sqm) areas respectively.
The fastest growth in prime rents (16.7 per cent) was recorded in the southern suburbs of O’Connor, Canning Vale and Myaree.
Growth was slightly slower in the north (15.2 per cent) and east (12.7 per cent).
Individual increases in rents of more than 21 per cent were recorded by the high-tech industry in the north.
While demand for constructed supply was high, industrial land prices also performed strongly, rising by more than 60 per cent during the year.
Bassendean recorded the highest growth of 83 per cent, bringing rents to $550/sqm, while Osborne Park was up by 75 per cent ($1400/sqm), and Kewdale and Welshpool rose by 73 per cent ($650/sqm).
The Perth Airport redevelopment and land releases are expected to slow growth in land values this year.
Prime yields are expected to remain unchanged from six per cent to 6.5 per cent.
