Perth industrial market tipped to remain tight
Steady population growth and strong investment spending is tipped to underpin demand and buyer interest in Perth's industrial property market in the year ahead.
In its latest industrial research and forecast report for the second half of 2013, Colliers International found that while 2013 had seen a relatively subdued rental and investment market, Perth’s industrial sector remained tight in comparison to other major capitals such as Melbourne and Sydney, "with rents increasing and yields tightening in response to comparatively minor upward shifts in demand.”
Colliers director of industrial, Wayne Chorley, said that despite the downbeat commentary on the state of WA’s economic outlook in recent months, predictions of an adverse impact on the property market had failed to eventuate.
"We have not seen any major impact on vacancy, and rents have held up well with only a small increase in availability – stock at the top end of the market in particular remains very tight, with pent-up demand for larger assets," he said.
The report highlighted that while the resource sector project investment had come off a record peak from the 2012/2013 period, investment spending had remained strong. Deloitte Access Economics is forecasting quarterly expenditure out to 2021 to be about 20% higher than the five- year average to June 2013.
"China’s strong demand for iron ore is expected to continue, and drive a new round of construction activity and infrastructure spending in the less developed interior regions," it said. "This is expected to flow through to WA commodities demand over the medium term."
Chorley said “Institutional investors are looking at what remain reasonably strong forecasts and a build-up of capital, and it’s pushing up their level of interest in the WA market – and as a result we’re seeing a number of them looking to enter or increase their exposure to the Perth industrial sector". “At the same time, we’re now seeing the first green shoots and stirrings of activity in that smaller end of the market, which had been quiet for much of this year, so the signs are there that the market across the board is beginning to gear up again".
In the medium term, Colliers is projecting rental growth to be minimal. Cost cutting was the current trend among businesses and that was likely to reduce expansion, it said. “Perth’s industrial rents are in general already higher than most Australian capital cities and this is likely to impact landlords’ ability to push rents higher without further impacting industrial occupier sentiment," the report added.