Perth records strongest industrial takeup since 2015

Takeup reached over 120,000 sqm in Q3.

Occupier demand in the Perth market increased over 3Q22 according to a JLL report, with 120,100 sqm of gross take-up recorded across 14 major occupier moves (≥3,000 sqm). 

Quarterly gross take-up was the strongest recorded since 2Q15.

Here’s more from JLL:

The Perth industrial market recorded 277,000 sqm of gross take-up over the last 12 months, above the 10-year average of 216,000 sqm. Demand was led by the Transport, Postal & Warehousing (32.4%), Manufacturing (16.6%) and Wholesale Trade (12.4%) sectors. Pre-lease activity accounted for just 29.7% of gross take-up in the past year.

Perth industrial supply pipeline is limited

Five major developments (≥3,000 sqm) reached completion in 3Q22, totalling 59,400 sqm, which marked the strongest quarterly result since 3Q19. There are four projects totalling 55,900 sqm currently under construction and expected to be completed by mid-2023.

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.

Rents increase across all Perth industrial precincts

Average prime existing net rents increased across all three precincts in 3Q22. Rents in the East precinct increased by 15.1% over the quarter, a quarterly record high for the Perth logistics and industrial market. The North and South precincts also recorded increases of 10.0% and 8.2%, respectively.

Strong investor demand since the onset of the COVID-19 pandemic had resulted in significant compression in average yields across all precincts and grades, up until the beginning of 2022. However, rising cost of debt pressures have seen the yield compression cycle come to a halt, with prime yields decompressing by 25 basis points across all three precincts in 3Q22.

Outlook: The sector is expected to continue to perform strongly

Despite increasing cost of debt pressures, logistics and industrial investment demand remains robust with considerable capital seeking to be deployed. WA’s strong economic fundamentals as well as healthy occupier demand is expected to ensure robust performance of the asset class.

The industrial market continues to outperform other commercial property markets. Future demand for industrial space will be supported by the Transport, Postal & Warehousing sector further expanding operations, in order to handle increased movement of goods resulting from the rise in e-commerce activity.

Note: Perth Logistics & Industrial refers to Perth's industrial market (all grades).