Rents for prime industrial space in Perth have grown at their fastest rate in more than two decades, research shows.
Rents for prime industrial space in Perth grew at their fastest rate in more than 20 years during the March quarter, new research by real estate group Cygnet West shows.
Prime industrial rents reached an average of $123 a square metre in the three months to March 31, a 25.6 per cent increase on the same time in 2022.
At the same time, rents for secondary grade stock rose to $93/sqm, a 27.6 per cent year-on-year rise.
Perth’s industrial vacancy rate fell to 1.89 per cent in April, down from 2.15 per cent in October last year, with just 203,885sqm of properties at 2,000sqm or more available to lease.
Cygnet West head of research Quyen Quach said the rapid growth in rents reflected the heated construction market, in which developers struggled to keep up with demand for industrial space.
He said Perth’s industrial rents had been on a strong upward trajectory since 2021, with the scale of increase larger and more protracted than the last major spike recorded from 2006 to 2008.
In the two years to 2008, prime industrial rents rose 37.5 per cent, while secondary rents increased by 38.5 per cent.
Whereas from 2021 to 2023, prime rents increased by 46.3 per cent, while secondary rents rose by 43.4 per cent.
“The last spike was driven by a lack of land supply, whereas this time around it appears to be driven more by the slow delivery of construction projects, together with escalating build costs,” Mr Quach said.
The research shows developers are looking to take advantage of market conditions, by designing new industrial developments.
Cygnet West forecasts that record levels of new industrial developments are expected to be delivered to market in 2023, with 411,165sqm of new industrial space expected to come to market.
This compares with historical levels of about 245,000sqm a year, Mr Quach said.
“Due to the persistent shortage of construction labour, these projects are experiencing prolonged construction periods, significantly contributing to the ongoing reduction in industrial vacancy rates and the upward pressure on rental prices,” he added.
“Nonetheless, we are expecting the record supply levels will result in rental gains moderating through the balance of 2023, as the vacancy rate begins to soften.”
