Perth’s industrial gross takeup breaches 10-year average
The city recorded 224,100 sqm of gross takeup over the past year.
A recent report by JLL reveals that occupier demand in the Perth market increased over 2Q21, with 87,400 sqm of gross take-up recorded, across 12 major occupier moves (≥3,000sqm).
“Demand for industrial space remains concentrated within the East precinct, due to the area’s transport links and proximity to the airport, accounting for 48.1% of take-up over the last 12 months,” the analyst added.
Here’s more from JLL:
The Perth industrial market recorded 224,100 sqm of gross take-up over the last 12 months, above the 10-year average of 219,300 sqm. Demand was led by the transport, postal & warehousing (58.7%), manufacturing (12.2%) and retail trade (7.3%) industry sectors. Pre-lease activity accounted for just 9.1% of gross take-up in the last year.
Developers hold off on speculative developments
Four major developments (≥3,000 sqm) reached completion in 2Q21 totalling 20,300 sqm. In the last 12 months, 38,600 sqm across seven projects have reached completion. There are three projects, totalling 55,600 sqm, currently under construction and expected to be completed by the end of 2021. Speculative development accounts for just 7.6% of projects currently under construction.
The supply pipeline is limited beyond projects already underway with only one project with DA approval. New land holdings to the North and South of Perth may lead to an increase in pre-lease and design & construction activity in these precincts.
Strong rental increase in Perth’s core industrial precinct
Average prime existing net rents increased by 4.3% in the East precinct during 2Q21, the largest quarterly increase in nine years. A low supply pipeline coupled with significant take-up of industrial space over the last 12 months has led to higher rents in the East precinct. Net rents were stable across the North and South precincts over 2Q21.
Prime mid-point industrial yields compressed by 63 basis points (bps) across all precincts in 2Q21, to range from 5.25%-5.75%.
Outlook: The sector is expected to continue to perform strongly
The industrial market continues to outperform other commercial property markets. Future demand for industrial space will be supported by the transport, postal and logistics industry expanding operations to handle the increased movement of goods resulting from the rise in e-commerce activity.
The resilience of industrial assets through the COVID-19 pandemic has prompted strong investor appetite. Yields have remained firm with further yield compression dependant on the ability to unlock tightly held assets.
Note: Perth Logistics & Industrial refers to Perth's industrial market (all grades).