APPD Market Report Article

Perth

December 1, 2021

8.5%

AUD 108.5

Rents
Rising

Gross take-up in 3Q21 remains above the 5-year quarterly average

  • Occupier demand in the Perth market decreased over 3Q21, with 61,800 sqm of gross take-up recorded across 12 major occupier moves (≥3,000 sqm). Despite the decrease, 3Q21 take-up remains above the 5-year quarterly average of 41,100 sqm.
  • The Perth industrial market recorded 262,700 sqm of gross take-up over the last 12 months, above the 10-year average of 218,700 sqm. Demand was led by the transport, postal & warehousing (46.1%), manufacturing (13.9%) and professional services (6.1%) sectors. Pre-lease activity accounted for just 9.5% of gross take-up in the last year.

The Perth industrial supply pipeline is limited

  • No major developments (≥3,000 sqm) reached completion in 3Q21. In the last 12 months, 24,800 sqm across five 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 increases across all Perth industrial precincts

  • Average prime existing net rents increased across all three precincts in 3Q21. The North precinct recorded the highest increase in quarterly rents (up 5.4%), while the South and East precincts also recorded increases of 5.0% and 4.1% q-o-q, respectively. Strong tenant demand coupled with limited industrial supply across all Perth industrial precincts has resulted in a sharp increase in rents.
  • 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 3Q21 with average prime midpoint yields compressing by 50 basis points to 5.00% 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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