APPD Market Report Article

Perth

May 31, 2022

8.5%

AUD 109

Rents
Rising

Occupier demand softens over 1Q22

  • Occupier demand in the Perth market decreased over 1Q22, with 11,400 sqm of gross take-up recorded across three major occupier moves (≥3,000 sqm). Anecdotal evidence suggests tenant enquiry levels remain elevated; however, a lack of suitable supply has led to lower gross take-up over the quarter.
  • The Perth industrial market recorded 239,300 sqm of gross take-up over the last 12 months, above the 10-year average of 212,900 sqm. Demand was led by the Transport, Postal & Warehousing (38.7%), Manufacturing (14.2%) and professional services (9.3%) sectors. Pre-lease activity accounted for just 10.2% of gross take-up in the last year.

Perth industrial supply pipeline is limited

  • No major developments (≥3,000 sqm) reached completion in 1Q22. In the last 12 months, 24,800 sqm across five projects have reached completion. There are four projects, totalling 64,400 sqm, currently under construction and expected to be completed by the end of mid-2022. Speculative development accounts for just 6.5% 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 and construction activity in these precincts.

Rents stabilise over the quarter after strong growth in 2021

  • Average prime existing net rents were stable across the East and North precincts during 1Q22, as rental evidence was limited due to reduced occupier activity. However, the South precinct saw rents increase by 3.0% over the quarter. Despite recording no change over the quarter, strong rental increases were recorded across the East and North precincts over 2021.
  • Strong investor demand over the last 12 months has resulted in significant compression in average yields across all precincts in all grades. This continued in 1Q22 with average prime midpoint yields compressing by a further 13 basis points (bps) to a new all-time low of 4.63% across all Perth industrial precincts.

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 dependent on the ability to unlock tightly held assets.

Note: Perth Logistics & Industrial refers to Perth's industrial market (all grades).

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