The WA industrial and logistics sector was the strongest performer in 2021 across all commercial asset classes, with demand set to increase in 2022.
According to JLL, the state’s buoyant economic conditions, surging eCommerce sales and a rebound in the resources sector has seen the uptake of WA industrial property reach record levels – a trend that is expected to continue.
JLL Research Director for WA, Ronak Bhimjiani said companies are investing heavily in WA exploration to meet record commodity demand, culminating in industrial and logistics gross take-up levels being back at mining boom levels last seen in 2012.
“The 2021 gross take-up figure of 301,000sq m eclipsed the 2012 reading despite WA’s current population rising by only 0.7 per cent, due to forced border closures,” Mr Bhimjiani said.
“If we account for the fact that population growth will once again lift in 2022, the upside potential for industrial and logistics demand increases significantly.”
Head of JLL’s Logistics and Industrial for WA, Nick Goodridge said strong occupier demand will continue to drive the industrial sector, while the scarcity of land and rising construction costs are also contributing to supply issues.
“Surging occupier demand on the ground saw a record quarter of take-up across the Perth market in the fourth quarter of 2021, with some 80,000sq m of gross take-up recorded, an amount almost double the two-year quarterly average,” Mr Goodridge said.
“As vacancy rates decline, and development volumes and future supply remain pre-lease driven, stock availability will be problematic at a brokerage level locally.
“Surging demand on the ground in what is a relatively small market is already starting to feed through to face and effective rental growth, to the tune of 10 per cent in Perth’s east over the past 12 months.”
Mr Goodridge said the rise in eCommerce transactions has been a key driver of growth in the sector throughout 2021 and it’s a trend he expects to continue.
“eCommerce and related logistics were certainly the dominant driving force behind unprecedented demand for industrial and logistics space, with the sector representing 46 per cent of annual gross take-up,” he said.
“However, the balance of take-up was more evenly spread between the manufacturing, wholesale trade, construction, and professional services sectors.”
According to JLL, the current eCommerce penetration rate of 14.4 per cent is set to expand further, to 20 per cent by 2025, which alone is expected to result in an additional 640,000sq m of industrial and logistics space between 2022 and 2025 – a figure that could potentially rise to 1,000,000sq m when factoring in other sectors.
“When we pair the live data and our forecasts, it comes as no surprise that there is upward pressure on land values across the board,” Mr Goodridge said.
“The Perth market has traditionally had a finite supply of core land holdings, with this trend always being a safety net for developers and investors, particularly around tenant retention strategies.”
The unprecedented volume of investment into WA’s industrial capital markets sector over the past 12 months saw $1.5 billion invested across 23 transactions. Traditionally a market dominated by private ownership, the weighted arrival of institutional capital has according to JLL, structurally changed the face of the market.
“We don’t expect the appetite for WA assets to subside in the medium term, as capital allocations to industrial and logistics sector continue to grow amongst institutional buyers,” Mr Goodridge said.
“WA landlords will be a clear beneficiary of the limited opportunities on the eastern seaboard.”
