Land values and rents have continued to rise in Perth’s industrial market due to ongoing strong demand and limited supply, according to the latest research from Knight Frank.

Knight Frank’s Australian Industrial Review Q2 2024 found there were fewer industrial land transactions in Q2, but both smaller (sub 5,000sq m) and larger (1-5 hectare) lots have shown double digit growth year-on-year to Q2. 

While growth in values for smaller lots eased back marginally to 11% over the 12 months to the end of June (after 2% growth over Q2), values for larger lots accelerated with yearly growth moving from 10.9% in Q1 to 12.9% in Q2, after 4% growth over the quarter. 

This has been driven by strong land value growth in the North (14.3% y/y and 7% q/q) and Outer South (25% y/y and 4.1% q/q). 

In the North, Wangara has been a particularly strong market over the past 12 months, with both small and larger lot values growing substantially. Small lots are now at $420/sqm, up 20% on the year and 5% for the quarter. Large lot sizes have grown even faster by 22.8% y/y and 12.9% q/q to stand at $350/sqm.

In the established East both small and larger lots showed their strongest annual growth for 12 months (10.1% and 8.2% respectively) due to premium prices being paid for what land is available. Forrestdale has been particularly buoyant with small lot sizes up 33.3% y/y to $400/sqm and large lots up 30.0% to $325/sqm. 

In areas where land availability is greater, particularly the Outer South, values continued to trend upward across the board with overall increases of 24.8% and 25% y/y respectively for small and larger lots. Quarterly growth rates are slowing but remain positive. This growth is expected to continue as the southern corridor remains the area of Perth where land availability exists in any substantial quantum. 

Knight Frank Head of industrial Logistics WA Geoff Thomson said demand for industrial land in Perth remains strong.

“This strong demand, combined with constrained land availability, is pushing prices up,” he said.

“With prices high and increasing for land, in addition to existing high construction costs, developers are finding project feasibility more difficult to achieve. Because of this, owner occupiers remain the dominant force in the land market.”

The Knight Frank report found the limited supply of land and consequent limited new stock additions in Perth’s industrial market had led to an increase in rents across existing prime and secondary assets.

In Q2 the biggest upward movements in rents was identified in the secondary market, at an average increase of 7.1% y/y, while average prime rents were not far behind at 5.5% y/y.

The Outer South has seen the largest rental growth over the past year, at 8%.

Knight Frank Partner, Research and Consulting Dr Tony McGough said yields in Perth’s industrial market had remained stable over Q2, for a second consecutive quarter.

The research found prime yields were 6.38% and secondary 7%.

“After marginal tightening in certain areas in Q1 there have been limited transactions, reducing market information, and so contributing to continued yield stability,” he said.

“The consensus view is that both buyers and sellers are wary of broader economic conditions. This has helped to pause the market while stakeholders await clarity in the economic and financial data over coming months. 

“It is hoped an uptick in the resources sector will drive new project commencements and reinvigorate the market. It is expected that when transaction volumes increase, a much clearer picture of yield levels and market sentiment will emerge.”

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