- CBRE's new report shows Perth's industrial & logistics sector is set to perform extremely well
- This comes as business confidence grows and the Australian economic recovery is underway
- A shift in the investment paradigm is increasing demand for industrial warehouse space
In further mounting evidence that Australia’s industrial sector is set to make a massive comeback out of the pandemic, CBRE has recently released a new research report highlighting the growing strength of Perth’s industrial sector.
This comes after The Property Tribune reported on businesses and investors returning to Melbourne’s West, with CBRE completing nine major industrial lease transactions in the past four weeks.
According to CBRE’s Investor Intentions Survey, industrial and logistics became the most popular investment class, with nearly 45% of respondents seeking further exposure to the sector.
CBRE Senior Research Analyst, Nicholas Volk said COVID-19 had shifted the investment paradigm throughout the globe, highlighting the importance of holding well-located, quality product, with income secured by blue chip covenants.
“With substantial amounts of capital on the sidelines waiting to be invested, combined with suppressed transactional volumes in 2020, 2021 is culminating into a larger year for purchasing activity,” Mr Volk explained.
Relative to the rest of the world, Australia performed relatively well in combatting the spread of COVID-19. The unemployment rate fell to 5.8% in February, and the number of employed people had returned to pre-pandemic levels. GDP increased by a healthy 3.1% in the December quarter of 2020, and this growth is expected to continue in 2021 and 2022.
WA managed to perform even better than these already impressive numbers compared to the rest of the nation.
According to the Australian Bureau of Statistics (ABS), the unemployment rate for the state declined from 6% in February to 4.8% this month and continues to lead the economic recovery in the nation.
With all COVID restrictions lifted in Perth, combined with the acceleration of e-commerce and changing consumer preferences to online shopping, this is now driving demand for quality, well-located warehouse space.
The value proposition for Perth against Sydney remains at a favourable level according to the CBRE report, with a yield spread of 90 basis points compared to the 20 year average of 79 basis points for super-prime product.
“Given the current demand for industrial assets and the reignition of belief in the Perth recovery story, it is expected that Perth yields will compress in line with long-term average spreads to the east coast,” Mr Volk said.
CBRE’s Head of Industrial & Logistics for WA, Jarrad Grierson said a shortage of opportunities for quality industrial assets around the country would ignite competitive buyer demand for stock in 2021.
“Demand for assets, particularly in Perth where the majority of the market is privately owned, will provide an attractive financial backdrop – helping maintain competitive yields and pricing,” Mr Grierson explained.
“Highlighting the growing momentum is the announcement of the market-setting transaction of Blackstone’s $3.8 billion Milestone Logistics portfolio to ESR. With 15% of this portfolio located in WA, bidding depth and pricing will highlight the demand for industrial property at scale.”
Jarrad Grierson, CBRE Head of Industrial & Logistics for WA
Perth’s industrial leasing market is also expected to perform well in 2021. Vacancies have been absorbed by the market.