Industrial market strongest in WA: NAB
Western Australia will be the best-performing industrial market over the next two years, according to NAB’s June quarterly commercial property forecast.
Respondents forecast growth in property values and rental returns in the industrial sector to exceed the industrial markets of every other state up until June 2013 due to supply constraints.
Across a sector where negative conditions persist (only retail faces more headwinds), industrial property capital values in WA are forecast to grow by 2.5% in 2012 and 3.9% in 2013, in comparison with modest forecast national growth of 0.1% and 1.7% respectively.
Industrial rents in WA are expected to lift by 1.1% in 2012 before doubling to 2.2% in 2013. While modest, they are significantly better than the national outlook with rents set to contract by 0.5% in 2012 and increase by only 0.8% in 2013.
An under-supply of industrial properties relative to demand will cause WA industrial vacancies to fall to just 2.3% by 2013 from a current level of 4.5% and a national average of 6.4%.
Source: NAB
Activity in the WA market is being supported by strong state economic growth during which companies, especially in the mining and resources sectors, have expanded their industrial requirements.
As a consequence 40% of respondents identified leasing incentives as “not at all significant” – the highest proportion of responses across all state markets.
Savills Perth quarterly industrial update revealed few industrial sales and no new developments.
The biggest sale of the quarter was a 6,600-square-metre industrial property at 4 Beach Street, Kwinana Beach, 43 kilometres south of Perth, which sold for $6.4 million at a yield of 10.5%
Three plots of land zoned for industrial development changed hands in the second quarter of the year all located in Bibra Lake, a suburb 20 kilometres south of the Perth CBD. The biggest of these was a 6,800-square-metre plot at Phoenix Park bought for $2.2 million at $326 per square metre.
Nationally, the June quarter survey revealed expectations of a weaker upswing, with the industrial index set to rise by 23 points by June 2012, compared with a rise of 55 points in the March quarter.
The gloomier outlook is as a result of weaker sentiment in the manufacturing sector and broader economy.
Overall, industrial rents are expected to decline by 0.9% in the June quarter, with vacancy rates picking up slightly in industrial markets in June as the domestic economy slows.
The impact of rental incentives in the national industrial property space is seen as “somewhat significant”, but trends remain divergent across the states.
June quarter respondents assessed the industrial property market as mildly over-supplied, but supply is expected to tighten over the next three to five years, especially in WA.
