Perth Commercial & Industrial Property Market Review - March 2024
“Several recent land sales in the Welshpool/Kewdale area reveal rates between $550/sqm-$600/sqm for 1Ha + sites, which reflects an increase in order of 30% above pre-pandemic levels, demonstrating the continued appetite for core industrial land and setting new precedents in the market.”
Perth’s Industrial market continues to remain robust, fuelled by record demand from owner occupiers and continued strength in the resources sector.
Whilst investors appear to have adopted a more cautious outlook across the back of 2023 and going into 2024 amidst uncertainty around rising cost of debt and inflation, owner occupier activity remains buoyant, with many businesses that support the states resources sector seeking to acquire sites and construct purpose-built facilities that support their operations.
These parties, competing with private developers, traditional high net worth and institutional investors are fuelling the demand for land in core areas. Several recent land sales in the Welshpool/Kewdale area reveal rates between $550/sqm-$600/sqm for 1Ha + sites, which reflects an increase in order of 30% above pre-pandemic levels, demonstrating the continued appetite for core industrial land and setting new precedents in the market.
With record sale rates being achieve of built-form stock, driven largely by occupiers, there appears a ‘mismatch’ between buyer and vendor expectations when it comes to investment sales. Accordingly, investors have somewhat retreated from the market, and in the absence of transactional activity, anecdotal evidence suggests yield softening in the order of 25bps, taking average prime yield range to between 5.50% - 6.50%, with all but core/eastern stock considered to fall towards the upper end of this range. Secondary yields are averaging 6.00% - 7.00%.
There is still an ongoing shortage of rental stock, with vacancy at record low with rents across all grades having increased circa 35% year to date. Super prime industrial stock is achieving rates in the order of $160/sqm, prime rents averaging $130/sqm and secondary stock averaging $115/sqm.
Based on the continued shortage of stock, relative affordability of Perth Industrial rents (as a portion of businesses operating costs) and continued strength of the resources sector, we anticipate rents will continue to grow in the West, albeit at a more moderate rate.
Chris Chesky, MLV Real Estate