Perth Commercial & Industrial Property Market Review - September 2022
Industrial property experienced buoyant conditions across the first half of 2022, and despite the onset of consecutive interest rate rises and high inflation, the sector remains well placed to navigate these challenges.
Rental demand remains robust and a limited supply of warehousing, logistics and manufacturing space continues to underpin the circa 20% rental growth experienced across the last 12 months. MLV Research in the core suburbs reveals net face rents averaging $110/sqm -$120/sqm, and modern purposed built facilities achieving in excess of $120/sqm.
Yields compressed to record lows in the first half of 2022, with prime yields in the vicinity of 5.00%-5.50%, and secondary stock ranging from 6.00%-6.75%, however it is anticipated that yields have stabilised, and may soften accordingly due to the rising cost of capital.
With a limited supply of both built form product or land for design and construct or speculatively built developments in core areas, land values remain elevated and fringe/secondary areas have risen appreciably for the first time in many years.
Amidst this land supply shortage, developers and occupiers are fighting to acquire well-located rural/rural residential lots that offer scope for re-zoning to ‘industrial’ in the future.
Despite the likelihood of further interest rate rises impacting debt serviceability, we expect the WA industrial market to remain resilient going forward, underpinned by strong rental demand, Perth’s favourable yield differential and investors positive perception of industrial property as an asset class.
“We expect the WA industrial market to remain resilient going forward”