WA MARKET OVERVIEW
WESTERN AUSTRALIA
Ross Palframan - Cushman & Wakefield - Director, Sales & Leasing, WA Logistics & Industrial
As we move into the second quarter of the calendar year, with fewer seasonal obstacles like Easter and public holidays in front of us, describe the sentiment among vendors and buyers across the industrial market in Perth and has there been a shift? Coming off the back of a cautious period due to interest rate uncertainty, sentiment remains strong amongst investors, owner occupiers and developers seeking to deploy capital into the logistics and industrial sector across Western Australia, albeit for the right product with the right metrics. In addition to the structural tailwinds the sector is experiencing, Western Australia remains an attractive investment destination, providing a strong mix of positive economic and population growth, with a transparent and mature regulatory framework. As a result of demand for zoned industrial land consistently surpassing supply, we have seen a trend emerge of long term private land owners looking at divestment strategies of generational land holdings, as they see the current market cycle as an opportune time to fully realise the value of their land holdings. We are also seeing demand from owner occupiers increase as a result of sustained rental growth in the sector. With ongoing interest rate instability and uncertainty on where market yields sit, what’s the appetite from vendors to meet price expectations from buyers?
and ask expectations between buyers and sellers, and with relatively scarce transactional evidence in the last 12 months, it will take some time and transactions to go through to reset these expectations. With the cash rate in May 2024 remaining steady at 4.35% and despite higher-than-expected inflation for the March quarter, the consensus view from most economists is that the interest rate expansionary cycle has passed. Based on the outlook for interest rates, the yield expansion cycle is widely viewed to have run its course and buyers and capital sources that sat on the sidelines in 2023 are more active again. Greater participation in the market across campaigns our team have run, in tandem with an expected stabilised interest rate environment will likely provide scope for increased transaction activity and modest levels of yield compression in early 2025. We hear that construction costs have peaked, have project feasibilities improved? If so, what has been the overarching impact on demand and supply for industrial development projects? The challenge of increased land values as well as an inflationary construction environment has certainly provided its challenges for industrial developers, although this has been offset by surging tenant demand and a compelling rental growth environment underwriting business cases for development.
ROSS PALFRAMAN
There is still a gap to be bridged between bid
Leasing demand remains healthy across the
112 – May / June 2024
Powered by FlippingBook