Perth Commercial & Industrial Property Market Review - August 2023
“With annual inflation for Q223 at 6.0%, the second consecutive quarter of lower annual inflation down from a peak of 7.8% in Q422 - could it be the catalyst for an uplift in activity in the back half of 2023?”
Perth’s Industrial market continues to maintain strength in light of broader economic uncertainty and higher funding costs.
Coming off the back of a very strong period of growth in 2022, investors appear to have adopted a more cautious outlook going into 2023, as evidenced by limited investment activity across the last quarter and softening of yields, in the order of 25bps.
Notwithstanding this, there remains strong demand for quality space in core locations amid this shifting sentiment. Anecdotal evidence suggests the average prime yield range is between 5.25% - 6.25%, with all but core/eastern stock considered to fall towards the upper end of this range. Secondary yields are averaging 6.00% - 7.00%.
Occupier activity remains buoyant, with MLV Real Estate having recently sold several properties in the $2mil-$5mil range to occupiers at record prices. The strength of the occupier market reflects the strong position of small-medium businesses, along with record low vacancy and limited supply of 2,000 sqm – 5,000sqm properties for sale or lease across Perth.
Rental market conditions remain strong, with rents across all stock and grades having increased circa 35% year to date. Super prime industrial stock is achieving rates in the order of $140/sqm, prime rents averaging $120/sqm and secondary stock averaging $100/sqm. As supply is added to the market in the back half of 2023, we anticipate a degree of stabilisation in rental growth, albeit minor.
New industrial land supply remains tight, particularly in the Eastern corridor with capital values for 1-5ha lots averaging $475/sqm - $575/sqm in the Welshpool & Kewdale locations and land in Hazelmere achieving a rate of $425/sqm, revealing record rates for the precinct and demonstrating the strong appetite for industrial land.
With annual inflation for Q223 at 6.0%, the second consecutive quarter of lower annual inflation down from a peak of 7.8% in Q422 - could it be the catalyst for an uplift in activity in the back half of 2023?
Chris Chesky, MLV Real Estate