APPD Market Report Article

Perth

February 28, 2022

8.5%

AUD 109

Rents
Rising

Gross take-up in 4Q21 firmly above the 2-year quarterly average

  • Occupier demand in the Perth market increased over 4Q21, with 78,873 sqm of gross take-up recorded across ten major occupier moves (≥3,000sqm). Quarterly take-up remains above the 2-year quarterly average of 49,000 sqm.
  • The Perth industrial market recorded 300,800 sqm of gross take-up over 2021, the second highest annual figure on record. Demand was led by the transport, postal & warehousing (46.0%), manufacturing (12.2%) and professional services (6.0%) sectors. Pre-lease activity accounted for just 6.8% of gross take-up in the last year.

Perth industrial supply pipeline is limited

  • No major developments (≥3,000 sqm) reached completion in 4Q21. 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 13.4% 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 across all Perth industrial precincts

  • Average prime existing net rents were stable across all three precincts in 4Q21. Despite recording no change over the quarter, strong rental increases have been recorded across all Perth industrial precincts over 2021. Strong tenant demand coupled with limited industrial supply across all precincts has resulted in a sharp increase in annual 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 4Q21 with average prime midpoint yields compressing by 25 basis points to 4.75% 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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