Perth's industrial market has stabilised after consecutive periods of strong growth, according to the latest research from Knight Frank.

The firm’s Australian Industrial Review Q1 2023 found the first quarter of this year had been slower in terms of activity, but there remained a shortage of quality space to meet strong demand.

As a result, vacancy in Perth’s industrial market is still low, leading to ongoing rental growth, said Knight Frank Associate Director Research and Consulting Dr Theo Connell-Variy.

“Perth’s prime average market rents increased by 1.9 per cent through Q1 2023 to reach $135.60 per square metre, reflecting sustained market momentum in spite of slowing economic growth,” he said.

“This quarterly growth has lifted the annual growth rate to 36.8 per cent, putting the Perth market on par with Sydney, where tight supply has resulted in yearly rental growth of 38.7 per cent.

“Perth’s industrial market has continually shown rental growth above the averages of the East Coast, however in the most recent quarter growth in the west has clearly moderated while other cities such as Sydney have accelerated.

“This is arguably as reflective of the slowdown in Perth as it is a strong, resurgent demand for high-quality assets in Sydney.”

Knight Frank’s Australian Industrial Review Q1 2023 found Brisbane led rental growth across the Eastern Seaboard cities over the first quarter of this year with prime rents up 8.6 per cent, compared to Sydney (8.2 per cent), Adelaide (2.5 per cent) and Melbourne (1.5 per cent).

Knight Frank Head of Industrial Perth Geoff Thomson said given the broad economic environment, the stability seen in Perth’s industrial market over the first quarter was positive.

“The east remains tight with the strongest demand but there has been a recent uplift in demand for the Inner South precinct as occupiers look for alternatives, leading to strong growth in rents and values,” he said.

“Consecutive periods of strong growth in the east have caused occupiers to head south and search for a slightly more affordable option, and more importantly, where there is more space available.

“Larger allotments are more sought after, with values also reflecting this.

“Land values for properties of less than 5,000sq m have risen by 14.01 per cent over the past 12 months, while for properties of 1 to five hectares land values have risen by 15.7 per cent across all precincts.

“Meanwhile yields in inner and outer south precincts and secondary markets have almost universally remained static.”

Knight Frank Head of Industrial Investments WA Tom Iredell said across the board the Perth prime industrial property market has continued to experience a slight softening of yields in line with national trends resulting from rising debt costs.

“Yields are expected to remain above East Coast capitals, with Sydney rental growth this quarter suggesting a slight shift in demand with changing economic conditions,” he said.

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