Reflective of buoyant local economic conditions and land supply pressures, warehouse demand has increased significantly across the Perth industrial market with vacancies falling to new lows. 

In 2022, almost 150,000 sqm has been leased in Perth so far (facilities above 5,000 sqm), underpinned by the transport and logistics and retail trade sectors. By comparison, approximately 190,000 sqm was leased in 2021 and around 110,000 sqm in 2020.

Colliers Senior Executive for Industrial, Hayden Dick and Effective Property Solutions Head of Commercial & Industrial, Justin Mabarrack are in the process of finalising an acquisition sourcing 3 land opportunities in recent months inclusive of a 3 hectare land holding on behalf of an interstate buyer looking to capitalise on the strong industrial leasing market.

Mr Dick said “Interstate developers have become heavily reliant on WA based agents to source and acquire (off-market) development opportunities due to the lack of land available in key  metropolitan industrial precincts”.  

Colliers Director of Research, Luke Crawford said “Nationally, vacancy rates have fallen sharply over the past 12 months, led by supply chain volatility which has forced occupiers to hold more stock locally. As of Q2 2022, the national industrial vacancy rate totals 1.0%, down from 2.3% in Q1 2022.

Perth’s shortage of warehouse space is more acute, with a vacancy rate of just 0.2%, making it the tightest capital city market in the country. The lack of leasing options has led to record levels of rental growth across the Perth market, with prime rents growing by 22.9% over the past year, well above the national average of 13.8% over the same period.

The prime industrial areas in the eastern corridor such as Kewdale and Welshpool have created renewed demand for fringe industrial precincts such as Maddington, with several prime grade facilities in the area housing key national operators such as Bunnings, Intertek, Dulux and Yusen Logistics developed in recent years.

Mr Dick and Mr Mabarrack have launched a pre-lease premium grade industrial facility in Maddington this week and is a prime example of a product being created to meet market demand at the right time. 

To counteract for the tight vacancy seen in the market, Mr Dick said “146 Maddington Road provides an opportunity for occupiers to relocate into a premium grade office and warehousing facility ranging in sizes from 5,000 sqm to 15,000 sqm to accommodate the future growth of their business operations.  The development at 146 Maddington Road will cater for operators in sectors such as e-commerce, logistics, transport and mining services and is due for practical completion in Q4 2023.” 

Investors have recognised the strong fundamentals of the industrial sector and the outlook for income growth and as a result, the flow of capital into logistics has increased substantially as both local and offshore investors re-weight their allocations to the sector. 

Mr Mabarrack said “despite recent supply chain constraints and ongoing construction cost increases, developers are making the decision to construct properties on spec to capitalise on the tight vacancy across the market and prospective future rental growth”

From a pricing perspective, industrial yields in Perth have remained steady in Q2 2022, while some modest expansion of yields has been recorded in the East Coast markets. Perth’s higher yield range, compared to the likes of Sydney and Melbourne, has provided somewhat of a buffer to rising funding costs. 

Mr Crawford said “Looking ahead, it is likely that some yield expansion will occur in the Perth market as higher interest rates and funding costs become priced in. However, the pick-up in rents is expected to preserve asset values which are expected to offset increased yields.”