Perth industrial market nearer the bottom: Ray White
Perth prime industrial rents are still falling, but the rate of decline has moderated after two “outstanding” years of absorption of vacant space, according to a new report by Ray White Commercial.
Over the past 12 months to March 2019, over 130,000 square metres of vacant industrial space was absorbed by mainly small businesses, a Ray White survey of spaces smaller than 5000sq m found, making it the second consecutive year of “substantial absorption”.
As a result, 854,340 square metres of vacant space is available for lease, down from almost 1 million square metres a year ago. More than 1200 buildings across Perth remain available for lease.
Perth prime industrial rents have been falling since late 2012 and early 2013 after the mining boom ended, having peaked at between $100 and $110 per square metre.
Currently, prime net face rents average $83 per square metre in the east, $87 per square metre in the North and $81 per square metre in the south, with the rate of decline noticeably flattening out in the past 12 to 18 months.
Ray White attributed the lower levels of vacancy to signs of improvement in the Perth economy, with both job creation and population growth on the rise.
“While net face rents have been affected, the vacancy situation continues to improve, and the market is likely to enter a period of rental stability until more absorption is recorded,” said Ray White’s head of research Vanessa Rader.
“Encouraging, is the increase in opportunistic investors enquiring on stock in the Perth market, signalling their anticipation of growth in the short to medium term.”
Improved confidence
Highlighting the improved sentiment about the Perth industrial market, in March, the Lendlease-managed Australian Prime Property Fund Industrial acquired a 1.856-hectare industrial site in Perth for a new $20 million facility in Gnangara in the north to be leased to Iron Mountain and developed by Gibb Group and Linc Property.
In another deal in December, ASX-listed Centuria Industrial REIT acquired two sites on an industrial estate at Hazelmere in the east were acquired for $23.8 million from a local private investor on a 7.5 per cent initial yield.
Ray White Commercial director for WA Chris Matthews said: “We’ve witnessed some improvement in confidence surrounding the Perth industrial market over the last six months; this has resulted in take up in space, however, slightly at the expense of average net face rents, especially for properties of a lower standard.
“With high competition in the market, there has been a greater acceptance by owners to correct their rental expectations in order to secure a tenant; with absorption now enjoyed, rental declines have moderated.
“As rents have shown stability over the last six months, this may signal the end of rental contractions in the short term.”
According to Ray White, the northern industrial precincts enjoyed the greatest take-up of vacant space over the past year and now account for 38.6 per cent of vacant stock, compared with 42 per cent six months ago.
The East Perth industrial market now accounts for 308,231 square mtres (36 per cent) of vacant space, with the bulk of absorption over the past year having been in suburbs such as Canning Vale and Welshpool.
South Perth continues to maintain the smallest vacancy with 215,973 square metres, the Ray White report found.
“Right now, there are 1212 industrial properties under 5000 square metres currently listed for lease across the Perth metropolitan area, this is down 19 per cent over the last year,” Mr Matthews said.
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