APPD Market Report Article
PerthSeptember 4, 2023
Annabel McFarlane, Head of Strategic Research, Australia
Occupier demand improves
- Occupier demand in the Perth market improved over the quarter, with gross take-up of 41,300 sqm recorded across five major occupier moves (≥3,000 sqm). Nevertheless, activity in the quarter remained below the two-year quarterly average of 59,700 sqm.
- The Perth industrial market recorded 213,200 sqm of gross take-up over the last 12 months, above the 10-year average of 194,200 sqm. Demand was led by the Transport, Postal & Warehousing (24.4%), Manufacturing (19.1%) and Retail Trade (12.9%) sectors. Pre-lease activity accounted for 21.4% of gross take-up in the previous year.
Uplift in the future supply pipeline
- No major developments (≥3,000 sqm) reached completion in the quarter. Nevertheless, the last 12 months has seen 59,400 sqm of new supply added across six projects. There are seven projects totalling 80,400 sqm currently under construction that are expected to be completed by year-end 2023.
- The potential future supply pipeline has seen an uplift with 12 projects in the plans-approved or plans-submitted stages totalling 121,600 sqm.
Rents stable across all Perth industrial precincts
- Average prime existing net rents were unchanged across all three precincts in the quarter, ending four consecutive quarterly increases in rents. Nevertheless, annual rental growth has been strong across all precincts. Rents in the East precinct were up 23.9% y-o-y, while the North and East precincts also recorded increases of 18.5% and 17.7% respectively.
- Rising cost of debt pressures have continued to slow investor demand, leading to further yield decompression for industrial and logistics assets. Prime upper and lower yields decompressed by 25 basis points across all three precincts, taking the prime yield range to 5.50%–6.00%.
Outlook: Rental growth is expected to maintain upward momentum
- Rental growth is expected to remain positive in the medium term, driven by strong demand and scarcity in supply. Nevertheless, with global economic conditions set to deteriorate in the latter half of 2023, growth expectations are anticipated to be softer.
- Occupier demand is anticipated to remain elevated assuming broader economic conditions remain positive. The e-commerce sector is expected to continue to lead sectoral demand, driven by strong ongoing consumer spending tailwinds.