EOFY Wrap by Chris Chesky, MLV Sales & Leasing Agent
Industrial property continues to be one of the most sought-after asset classes, with the Perth Industrial market continuing to experience extraordinary levels of demand across the first half of 2022, fuelling transactional activity, rental growth, capital appreciation and further yield compression.
Rents have continued to grow rapidly in the last 12 months, with our research in the core suburbs of Welshpool, Kewdale and Canning Vale revealing net face rents averaging $110/sqm -$120/sqm, and modern purposed built facilities achieving in excess of $120/sqm, reflecting growth in the vicinity of 15% -25% year-to-date. The growth in rents represents increasing tenant demand and limited supply of both built form product and vacant land.
Transactional activity remains buoyant, particularly in the sub $2 million dollar market as owner occupiers have been taking advantage of record low interest rates and look to secure space amidst further potential rental growth. Investors continue to be attracted to industrial property, drawn to the stability of these assets offering favourable returns with strong lease covenants and long lease durations.
Yields have further compressed across all stock with prime yields having contracted to 5.00%-5.50%, reflecting approximately 50bps -75bps compression year to date and secondary stock in the order of 6.00%-6.75%. Favourable yield differentials continue to lure investors from the Eastern seaboard, with MLV Real Estate selling multiple leased assets to East Coast private investors in 2022 at sub 5.75% yields.
Despite the likelihood of further interest rate rises, we have seen no signs of market activity slowing in the West and expect the Perth Industrial landscape to remain a competitive one across the second half of 2022.