The Perth industrial property market may have enjoyed significant growth in 2007, but property analysts say this year is unlikely to deliver the same returns, despite supply remaining fairly tight.
The Perth industrial property market may have enjoyed significant growth in 2007, but property analysts say this year is unlikely to deliver the same returns, despite supply remaining fairly tight.
According to research from CB Richard Ellis, construction is under way on about 230,000 square metres of new industrial land, which is due to come on-line in 2008.
Accounting for more than half of this is Perth Airport, where about 140,000sqm of land will be developed to cater for large warehousing tenants.
The bulk of this is expected to be taken out by Coles and Toll Group, which are building warehouses of about 70,000sqm and 20,000sqm, respectively.
Other developments are taking place in Perth’s eastern corridor, around Hazelmere, with smaller projects in Bibra Lake, Cockburn, and Canning Vale.
On the land supply side, government agency LandCorp will release lots at eight of its 19 industrial developments in the greater Perth area this year.
The largest of these will be a 35ha tranche within the agency’s Latitude 32 project, located in Hope Valley/ Wattleup.
The release, to take place in July, will be stage one of a total 150ha area called Flinders Precinct, offering 39 lots from 3,000sqm to 43,000sqm.
A further release is planned for later in the year, with 71ha in total pegged for development in 2008.
Nearby, the final stage of the Cockburn Commercial Park development, which has a total industrial land area of 67ha, is scheduled for release in the next 12 months.
Lots in the stage five release, which is three-quarters sold, will range from 2,500sqm to 1.4ha.
At the other end of the metro area, Stage 10A of Wangara’s Enterprise Park, which was released in November last year, is scheduled for settlement in July.
The release, which WA Business News understands is completely sold, contains 18 lots between 1,800 and 3,400sqm.
Further north, LandCorp’s Meridian Park development at Neerabup will deliver 22ha in two tranches.
Private developments are also coming on stream, with Goodman International developing its 34ha site in Hazelmere, which formerly belonged to the WA Meat Authority.
The company, which plans to build an industrial park on the site, is in the process of signing tenants.
Other developments are taking place in Lansdale and Bullsbrook, while in Forrestdale, developer SAS Global Ltd has sold half of its 65ha Business Park, which is scheduled for settlement in December and has lots ranging from 1,800sqm to 1ha.
CB Richard Ellis research analyst Michael Olsen said increased demand for large sites was steering development.
“Perth Airport is really the only choice for large warehouse users,” he said.
“A trend we’re seeing is that there is a lot more demand for larger, more specialised mining-related warehouses.
Clients are requiring a lot more warehouses of 10,000sqm and 20,000sqm,” he said.
“However, in other areas, there’s no incentive to build (facilities) because of the returns of subdividing.” Savills divisional director industrial, Max Jones, agreed that land owners were keen to hold on to their assets.
“A few people have bought up reasonably large tracts of land, but they’re not looking at selling – they’re looking at doing their own developments,” he said.
“There’s not enough [supply] coming on to make any dent in demand.” Mr Jones said price growth was unlikely to match that achieved in 2007.
“There’s been fairly strong catchup in places like Bassendean and Malaga, where prices are around $600/sqm, so the growth for those areas will be smaller,” he said.
“But we’re finding almost across the board that prices are reaching $400/sqm or upwards.
Even in Hazelmere, where a lot of land has to be rezoned, you’re looking at $200 to $300/sqm, and that’s without services in place.” According to research from CB Richard Ellis, the average price for industrial land, based on 2.5ha lots, rose to $600/sqm in the December quarter, up from $550/sqm in the previous quarter.
Mr Olsen said land values were expected to grow at a more modest rate of 10 to 15 per cent in 2008, before levelling off in 2009 and 2010.
He said rents were also expected to grow by 12 per cent.
“You’ll see strong rental growth for some time, which they need in order to catch up with land values and justify construction,” he said.
“We also expect to see strong, double digit rental growth in 2009.” Colliers International director industrial agency Wayne Chorley said new land supply could create a greater degree of mobility in the market, with clients moving away from more expensive, established suburbs such as Malaga to take advantage of cheaper land in regional suburbs.
With supply remaining tight in 2008, the state government has committed to a $1 million planning strategy for industrial land, which is to be completed by December this year.
It has also pledged to accelerate the release of 200ha of land over the next three years.
