Perth Industrial Market

July, 2018

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Perth industrial market shows signs of improvement

Market Overview

Perth’s industrial market continues to show glimpses of improvement with tenant demand increasing, land values stabilising and rental declines slowing. Supply is also expected to remain moderate over 2018 resulting in a more positive short-term outlook for the market.

A key trend in the Perth market over 2017-18 has been the solid demand for larger new or higher quality, well-located space.  Rental discounts over recent years have made this space competitive compared to some longer existing lease tails and have resulted in demand for this higher quality space. Most tenants are looking for space in the inner or outer south markets in close proximity to major road infrastructure.


Gary Longden


View Profile > VIC

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Tenant Demand

Gross tenant demand, in terms of leases signed, increase over the year to June 2018, compared to the year prior (in deals over 1,000 square metres in size).  The increase was driven by solid activity in the Inner and Outer South submarkets. The south contains many of the larger industrial properties in Perth. These are favoured by the growing logistics and transport sector tenants. The Inner submarkets cater more to smaller tenants who require proximity to customers.  The increase in demand has largely come from tenants committing to new estates, in close proximity to major roads, including the Mitchell Freeway.

Only two of the Perth submarkets witnessed increased demand over the year to June 2018.  The suburbs with the highest levels of demand over the year were Bibra Lake in the Outer South, Hazelmere in the Inner East, Canning Vale in the Inner South and Welshpool in the Inner East.


Prime net face rents have generally decreased in Perth since March 2014.  While the trend has continued, the rate of discounting has slowed. Over the year to June 2018 rents fell 7.8% but have stabilised over the June quarter 2018. This indicates that the prime market may be at or near the nadir of the current cycle.  Rental declines continued in secondary space, particularly for space without proximity to major road or rail infrastructure.

“Incentives rose over the year to June 2018 as owners looked to lease excess space in the core markets.”

Gary Longden

Investment Market

Over the year to June 2018 there was around $447,546,600 worth of industrial assets traded in WA, down from $646,678,700 over the year prior. Developers with 18.7% of sales, by value, accounted for the largest portion of sales in the State over the year to June 2018 (in sales over $5,000,000 in value). Owner occupiers (16.4%) and overseas investors (16.0%) were also active.

Yields firmed over the past year despite falling rents, increasing incentives and generally subdued market conditions. This is largely on the back of continued investor demand. The divergence between prime and secondary markets remains, based on the primary market drivers of quality, location and lease covenant. Yields for prime assets as at June 2018 were typically in a range from 6.00% to 8.75%, while secondary yields are generally in a range from 7.00% to 10.00%.

Land Values

Land values fell by 0.4% over the year to June 2018.  Values in Perth dropped below the Australian average in the past six months for the first time in over a decade. This was due to Sydney and Melbourne, in particular, seeing strong growth and Perth values declining. Constrained supply historically in Perth resulted in it being the most expensive state on average from March 2011 to June 2017. Land values vary significantly depending upon size and location. Freehold sites of around one hectare in Perth are generally in a range of between $150 and $500 per square metre.