Sun finally rising in Perth as industrial investment sales grow
Three recent transactions by CBRE’s Perth industrial and logistics team have proven that the sun might finally be rising again in Perth, improving the outlook for the state and its property market.
24 Oct 2018
The three sales in Perth’s northern suburbs total $6.535 million, echoing sentiments of business confidence, increased employment opportunities and wages growth. On average, the sales had a contract period of less than 30 days.
CBRE’s northern corridor industrial and logistics team of Tom Iredell and Chris Monterosso sold 37 Paramount Drive, Wangara, for $2.35 million to a local private investor. The 4,930sqm site has a combined office and warehouse space of 1,812sqm. The property is fully leased to Pentair Flow Control Pacific until June 2021, with a five-year option to extend, representing an 8.8% annual return.
“The property benefits from an above market passing rent which resulted in a high level of investor interest over the short sale campaign. Its location within the established industrial precinct of Wangara, proximity to Hartman Drive and Ocean Reef Road, well maintained workshop and attractive passing income were the key incentives to purchase,” Mr Iredell said.
The second sale, in conjunction with Ayer’s Real Estate, was the former Bunnings trade centre, located at 48 Greenwich Parade, Neerabup, that sold for $3.4 million to a private owner/occupier. The 8,007sqm corner site has 3,150sqm of office/warehouse space and is located within Landcorp’s Meridian Park Industrial Estate, just 4km from the new Mitchell Freeway extension.
According to CBRE Research Manager Gemma Alexander: “Significant investments in infrastructure and construction projects around the state are benefiting the local industrial market. Road projects such as Northlink WA also benefit the industrial sector by increasing accessibility to existing industrial locales, whilst also opening up new industrial precincts (such as Bullsbrook and Muchea).”
The estimated total value of infrastructure projects – both public and private is approximately $60 billion - with around $13 billion situated in the Perth metropolitan area. Projects, including the Perth Museum and the Bunbury Waterfront, are expected to deliver circa 18,000 jobs from construction through to development and benefit the local industrial market.
“This will in turn increase occupier demand in these areas, placing upward pressure on rents and land values. A resurgence of activity in the resource sector will also filter through to property markets and the announcement of additional, large-scale projects will only add to the boom,” Ms Alexander added.
In a further transaction, a small-scale office and warehouse facility bordering residential development in Bayswater, has sold for $785,000. Located at 5 Irvine Street, the 1,009sqm property features two freestanding office/warehouses totaling 430sqm that is partly leased to a small, well-regarded local business.
“Transaction activity has lifted over the course of 2018, largely sparked by growing confidence in Western Australia’s mining economy. Owner occupiers are taking advantage of competitively priced stock while investors capitalise on attractive yields for properties with over-rented lease tails negotiated in the later stages of the mining boom,” Mr Iredell said.
After a number of turbulent years, the Perth industrial market is showing signs of stability. CBRE’s latest Australia Industrial MarketView report shows industrial rents began to stabilise over the six months to June 2018. Prime and secondary rents were $90/sqm and $71/sqm respectively, while super prime rents were $97/sqm.
“Ongoing investor interest, limited supply of investment-grade assets in the market, the yield premium compared to east coast assets and the historically low interest rate environment are all working to maintain downward pressure on industrial yields,” Ms Alexander said.
However, Perth industrial yields have remained unchanged at 7.44% and 8.25% for prime and secondary assets respectively. As positive sentiment spreads through the market, more investors will seek to make opportunistic buys.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2017 revenue). The company has more than 80,000 employees (excluding affiliates), and serves real estate investors and occupiers through more than 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.
Neither CBRE nor its affiliated companies make any warranties or claims on the implied accuracy of the information contained herein.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE: CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2021 revenue). The company has more than 105,000 employees (excluding Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at https://www.cbre.com.