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Savills Research
Western Australia
Spotlight
Perth Industrial
April 2015
Highlights
 A total of 144,926 square metres


of industrial space was reported
leased in the 12 months to March
2015
Approximately $354 million of
industrial property was reported
sold over the year
As values retreat demand from
investors and owner occupiers is
expected to increase
 Core land values range from $400


to $550 per square metre for
parcels up to 5,000 square metres
A large amount of forecast new
supply will likely lead to softening
conditions in industrial capital and
leasing markets over the next 12
to 18 months
Forthcoming peaks in lease
expiries may lead to an increase in
leasing activity as firms look to
take advantage of lower pricing
Prime rents in
Perth’s core
precinct range
from $90 to
$115 per
square metre
Savills Research
Savills Research | Perth Industrial
April 2015
Savills West Australia Team
Research
Managing Director
National Head
Tony Crabb
+61 (0) 3 8686 8012
Managing Director
Paul Craig
+61 (0) 8 9488 4156
[email protected]
[email protected]
Sales & Leasing
Property Management
Divisional Director
James Condon
+61 (0) 8 9488 4169
Divisional Director
Jason Ridge
+61 (0) 8 9488 4118
[email protected]
[email protected]
Valuation & Consultancy
Project Management
Divisional Director
Mark Foster-Key
+61 (0) 8 9488 4145
General Manager
Graham Nash
+61 (0) 8 6271 0306
[email protected]
[email protected]
Savills West Australia
Level 27, 108 St Georges Terrace
Perth, WA 6000 Australia
+61 (0) 8 9488 4111
savills.com.au
savills.com.au/research
2
Savills Research | Perth Industrial
April 2015
Introduction
Perth is the capital of Australia’s mining industry. Industrial users range from domestic
service industries such as mechanics and smash repairers to local and national
distribution facilities and manufacturing plants. Some of these industrial occupiers are
replicated in all capital cities of Australia. The unique factor in the Perth industrial market is
the scale, size and number of mining services occupiers.
Aside from being the centre of the mining industry in the country there are other
discriminating factors about Perth and industry. Most importantly, industrial land is
effectively controlled through a systematic release program by the State Government
through the Department of State Development and its instrumentality, LandCorp. The
industrial land management strategy is governed by an overarching strategy known as the
Economic and Employment Lands Strategy. The strategy monitors need and demand for
industrial land in order to maintain an appropriate supply pipeline.
The top sale in
the past 12
months was the
$50.35m sale of
22 Geddes St in
Balcatta
Savills Research
Throughout this document the Perth industrial market will be referred to in four main
precincts being the Core, North, East and South. The main suburbs within these precincts
are tabulated below.
Precinct
Suburbs
Core
Belmont, Canning Vale, Kewdale, Osborne Park, Welshpool, Jandakot Airport, Perth Airport
North
Balcatta, Joondalup, Malaga, Neerabup, Wangara, Landsdale, Bullsbrook
East
Armadale, Forrestdale, Forrestfield, Maddington, Hazelmere, Bayswater, Bassendean, South Guildford
South
Bibra Lake, Henderson, Jandakot, Kwinana, Myaree, Naval Base, O’Connor, Rockingham, Latitude 32
Source: Savills Research
Infrastructure
Whilst Western Australia’s economy has contracted in reaction to the slowing of the recent
mining investment boom it remains strong when viewed against the economy nationally.
Regional and metropolitan infrastructure development in Western Australia is continuing to
support this. Within metropolitan Perth, a number of key projects are also active, such as
the Perth Airport Redevelopment project, the Perth City Link project and the Elizabeth Quay
project. These projects aim to support future population growth and development of the
city. Another significant infrastructure project in the pipeline is the proposed Perth-Darwin
Highway. Once this project goes ahead it will open up a new industrial precinct through the
Bullsbrook area, which is likely to be favoured by transport and logistics companies. The
other infrastructure project significant to the industrial sector is the $1 billion Gateway WA
Perth Airport and Freight Access Project, currently under construction and due for
completion in 2017.
savills.com.au/research
3
Savills Research | Perth Industrial
April 2015
Leasing Activity
The total level of vacant space in
the industrial sector has been
increasing over the past 12
months. The weak level of tenant
enquiry is likely related to the
slowing of the resources sector as
is the availability of secondary
space, directly affecting the space
needs of a number of industrial
companies.
in Perth in the 12 months to March
2015. This is down on the year
prior (303,283 square metres) and
down on the five year average
(385,474 square metres). The
number of leases transacted in the
12 months to March 2015 totalled
31. By comparison the 12 months
to March 2014 recorded a total of
78 reported leases.
Savills identified approximately
144,926 square metres of
industrial accommodation leased
'Direct' leases accounted for the
majority of reported industrial
transactions over the period;
81,026 square metres or 56
percent.
The ‘Transport and Logistics’
industry leased the most industrial
accommodation, taking 50,252
square metres or 35 percent of
reported leasing activity.
The select major leasing deals
recorded over the last twelve
months are displayed in the table
below.
Select Perth Industrial Leases to March 2015
Date
Property
GLA
(sq m)
Rent
($/sq m)
Sep-14
17-21 Fargo Way, Welshpool
5,350
119
Jolly and Sons
Oct-14
6/290 Brand Hwy, Muchea
1,960
92
Lampson Australia
Oct-14
5 Abbott Rd, Perth Airport
5,633
125
Recall
Feb-15
Excellence Dve, Wangara
3,324
na
Undisclosed
Mar-15
159 Bushland Ridge, Bibra Lake
4,700
122
Undisclosed
Source: Savills Research
Tenant
na = not currently available
Select Perth Industrial Pre-Commitment Leases to March 2015
Rent
Date
Property
GLA
(sq m)
($/sq m)
Dec-14
4 Spartan Rd, Jandakot Airport
26,200
na
Reece Australia
Jan-15
Pilatus Rd, Jandakot Airport
11,200
115
Schlumberger
Feb-15
Vale Rd, Hazelmere
20,000
na
Mainfreight
Feb-15
Vale Rd, Hazelmere
na
na
CEVA Logistics
Source: Savills Research
Tenant
na = not currently available
savills.com.au/research
4
Savills Research | Perth Industrial
April 2015
Perth Industrial
Metropolitan Leases by Lease Type (sq m)
Mar-05 to Mar-15
500,000
450,000
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
-
Direct
Precommit
Source: Savills Research
Perth Industrial
Metropolitan Leases by Lease Size (sq m)
Mar-07 to Mar-15
600,000
500,000
400,000
300,000
200,000
100,000
-
< 2,000
2,000 - 5,000
5,000 - 10,000
10,000 - 15,000
> 15,000
Source: Savills Research
savills.com.au/research
5
Savills Research | Perth Industrial
April 2015
Leases in the ‘Core’ accounted for the majority of industrial stock reported leased in the 12
months to March 2015 which recorded total leasing activity (excluding pre-commitments) of
48,697 square metres or 60 percent. The ‘Core’ also reported the most number of leasing
deals totalling 14. Of the 144,926 square metres of stock that was reported leased in the 12
months to March 2015, 63,900 square metres was precommitted to new buildings.
Prime industrial rents as at March 2015 typically range from $85 to $110 per square metre
per annum net for industrial buildings in the North, and between $75 and $100 per square
metre per annum net for industrial buildings in the South. The average rent in the North is
$95 per square metre per annum net, a 5 percent fall over the year. Secondary industrial
rents over the period typically range from $65 to $90 per square metre per annum net for
industrial buildings in the North, and between $60 and $85 per square metre per annum net
for industrial buildings in the South. The average rent in the North is $78 per square metre
per annum net, an 9 percent fall over the year.
Prime rents in
the North
range from
$85 to $110
per square
metre
Savills Research
Looking forward it is likely that the industrial leasing market will soften further as firms
continue to display caution and as more supply is made available to the market.
Perth Industrial
Average Prime Net Face Rents by Precinct ($/sq m)
Mar-06 to Mar-15
$140
$120
$100
$80
$60
$40
$20
$0
Perth Core
Source: Savills Research
North
South
East
savills.com.au/research
6
Savills Research | Perth Industrial
April 2015
Sales Activity
The industrial property sales market was affected (like all property markets) by the Global
Financial Crisis. It subsequently picked up in response to the state’s mining boom. As the
influence of the resources sector softens and a number of projects move from the
‘construction’ to ‘production’ phases of their lifecycle, industrial sales activity has come off
accordingly.
Savills recorded approximately $354 million worth of reported industrial property
transactions in the 12 months to March 2015, down from $670 million in the previous year,
and down on the five year average ($610 million). In the 12 months to March 2015, 53
properties were sold, down from the previous 12 months total of 143, and down on the five
year average of 131.
Average prime
capital values
in the Core
decreased by
5% over the
past year
Savills Research
Perth Industrial
Metropolitan Industrial Sales ($m and number)
(>$1m) Mar-06 to Mar-15
250
$1,000
$900
200
$800
$700
150
$600
$500
100
$400
$300
50
$200
$100
0
$0
Sales >$1m (LHS)
Sales No (RHS)
Source: Savills Research
Prime industrial capital values as at March 2015 are estimated to range from $950 to $1,500
per square metre for buildings in the North, and between $800 and $1,350 per square metre
for buildings in the South. Average prime capital values for properties in the North were
largely unchanged over the year. Secondary industrial capital values as at March 2015 are
estimated to range from $700 to $1,200 per square metre for buildings in the North, and
between $600 and $1,000 per square metre for buildings in the South. Average secondary
capital values for properties in the North fell approximately 5 percent over the year.
Industrial land values have softened in all sectors in the 12 months to March 2015; these
prices are expected to remain relatively unchanged over the rest of 2015.
Perth Industrial Land Values ($/sq m) March 2015
Precinct
Small <5,000
Medium 10-50,000
Large 100,000+
Englobo
Core
400 - 550
350 - 450
250 - 350
na
North
300 - 525
100 - 450
50 - 350
na
South
175 - 525
150 - 350
100 - 225`
55 - 80
East
180 - 500
140 - 325
85 - 275
40 - 85
Source: Savills Research
savills.com.au/research
7
Savills Research | Perth Industrial
April 2015
In the 12 months to March 2015, approximately 58 percent of the total value of industrial properties reported
transacted in Perth were valued in the range $1-$10m. Over the same period $107 million worth of reported
transactions occurred in each of the ‘North’, ‘South’ and ‘Core’ precincts, accounting for 91 percent of the industrial
sales. In the year prior, the ‘Core’ recorded the highest value of transactions, worth $224 million. The 'Trust'
purchaser category was the most active in the investment market for the year ended March 2015, purchasing 37
percent or $128 million of stock reported sold, followed closely by ‘Private Investors’ at 20 percent ($69 million).
Perth Industrial
Metropolitan Industrial Sales Buyer Profile (%)
(>$1m) 12 months to Mar-15
Private Investor
20%
Fund
5%
Developer
4%
Syndicate
6%
Owner Occupier
13%
Trust
37%
Undisclosed
15%
Source: Savills Research
Prime industrial yields as at March 2015 are estimated to range between 7.25% and 8.75% in the North, and
between 7.50% and 9.00% in the South. The average yield for investment properties in the North in the quarter to
March 2015 is 8.00%, a fall of 38 bps over the year. Secondary industrial yields as at March 2015 are estimated to
range between 7.50% and 9.25% in the North, and between 8.00% and 10.00% in the South. The average yield for
investment properties in the North in the quarter to March 2015 is 8.38%, also showing a fall of 25 bps over the year.
Select Perth Industrial Investment Sales to March 2015
Date
Property
Price ($m)
GLA (sq m)
$/sq m
Yield (%)
Sep-14
2 Jones St, O’Connor
7.80
2,841
2,746
8.20
Nov-14
14 Juna Drive, Malaga
1.59
926
1,717
7.13
Nov-14
4 Uppill Place, Wangara
1.38
830
1,657
5.82
Dec-14
239 Planet St, Welshpool
29.88
17,530
1,704
8.00
Jan-15
74 McCoy St, Myaree
11.50
3,608
3,187
7.25
Feb-15
1000 Abernethy Rd, Forrestfield
25.00
7,500
3,333
7.20
Feb-15
44-50 Great Northern Hwy, South Guildford
6.50
3,005
2,163
8.20
Source: Savills Research
savills.com.au/research
8
Savills Research | Perth Industrial
April 2015
Select Perth Industrial Vacant Possession Sales to March 2015
Date
Property
Price ($m)
GLA (sq m)
$/sq m
Jul-14
99 Inspiration Dr, Wangara
4.53
3,018
1,499
Jul-14
159 Abernethy Rd, Belmont
3.05
1,994
1,530
Aug-14
329 Victoria Rd, Malaga
2.50
2,012
1,243
Oct-14
23 Jackson St, Bassendean
2.20
2,254
976
Price ($m)
Area (sq m)
$/sq m
Source: Savills Research
Select Perth Industrial Land Sales to March 2015
Date
Property
Sep-14
111 Warren Rd, Bullsbrook
8.00
212,600
38
Oct-14
37 Lakes Rd, Hazelmere
19.00
67,100
283
Jan-15
13 Merino Entrance, Cockburn
3.47
3,664
946
Source: Savills Research
Key Market Indicators - March 2015
Core
Prime
Secondary
Low
High
Low
High
90
115
65
95
Yield - Market (%)
7.00
7.75
7.50
9.25
IRR (%)
9.00
10.00
9.25
10.50
20
35
15
25
1,100
1,600
700
1,200
Rental Net Face ($/sq m)
Outgoings - Total ($/sq m)
Capital Values ($/sq m)
Land Values 3,000 - 5,000 sq m ($/sq m)
400-550
Source: Savills Research
North
Prime
Secondary
Low
High
Low
High
85
105
65
90
Yield - Market (%)
7.25
8.50
7.50
9.25
IRR (%)
9.00
10.00
9.50
10.50
Outgoings - Total ($/sq m)
16
30
15
25
Capital Values ($/sq m)
950
1,500
700
1,200
Rental Net Face ($/sq m)
Land Values 3,000 - 5,000 sq m ($/sq m)
300-525
Source: Savills Research
South
Prime
Secondary
Low
High
Low
High
75
100
60
85
Yield - Market (%)
7.50
9.00
8.00
10.00
IRR (%)
9.25
10.50
10.00
11.25
Outgoings - Total ($/sq m)
16
30
15
25
Capital Values ($/sq m)
800
1,350
600
1,000
Rental Net Face ($/sq m)
Land Values 3,000 - 5,000 sq m ($/sq m)
175-525
Source: Savills Research
savills.com.au/research
9
Savills Research | Perth Industrial
April 2015
East
Prime
Secondary
Low
High
Low
High
75
105
60
90
Yield - Market (%)
7.50
9.00
8.00
9.75
IRR (%)
9.50
11.00
10.00
11.25
Outgoings - Total ($/sq m)
16
30
15
25
Capital Values ($/sq m)
850
1,400
600
1,100
Rental Net Face ($/sq m)
Land Values 3,000 - 5,000 sq m ($/sq m)
180-500
Source: Savills Research
Outlook
The total amount of available industrial stock in the Perth metropolitan region has continued on its upward
trajectory over 2014. This has led to further increases in vacancy levels, falling face rents and rising incentives;
with the level of deals being done being at the lowest level seen over the past decade. Despite this subdued
leasing market Savills expect the level of enquiry to pick up over the coming years, due to a significant number of
leases reaching expiration over the period. Tenants may choose to take advantage of the comparatively lower
rents and higher incentives to upgrade their current industrial accommodation.
Sales levels in the 12 months to March 2015 were at the lowest level seen in the post-GFC environment; however
the shortage of larger-sized, well located industrial lots seem to indicate that demand for this asset class is likely
to outpace supply. Some relief to this limited space may come from larger scale developments in areas such as
Perth Airport and Jandakot Airport, as well as in less central locations such as Hazelmere and Forrestfield to the
East and Neerabup and Bullsbrook to the North; Bullsbrook is beginning to emerge as a future industrial hotspot,
especially for large transportation and logistics firms.
Leasing and sales enquiries for prime quality properties with warehouses, excess lay down areas and/or gantry
cranes installed are likely to continue to be relatively strong, while secondary grade properties in fringe locations
are more likely to continue to struggle to generate interest.
savills.com.au/research
10
Savills Research | Perth Industrial
April 2015
Savills West Australia Team
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[email protected]
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