West Australian Commercial & Industrial Property Market Review - November 2021
What a year 2021 has been!
Last year, the COVID-19 outbreak sent our state into lockdown putting the commercial property market into a state of shock, significantly affecting market confidence. Fortunately for WA, our lockdown was only 3 months, and then it was back to business as usual, despite the border closures. In fact, towards the end of 2020, we had a complete turnaround, with a flourish in leasing and sales across the WA property market.
The positive sentiment has continued into 2021, with properties leasing quickly and sales being contracted within 24 hours due to high demand. Lessors have been able to achieve good lease terms, minimal incentives and better than market rents.
Recent sales by MLV Real Estate have indicated investors are seeking good investments and are preparing to offer low returns to ensure they secure these investments. Returns in 2019/20 were achieving 7%-7.5%, however, during 2020/21 the competition for these investments has seen the returns drop to 5.5% to 6%. This has seen values rise to unprecedent levels affecting not just the investments but vacant possession sales as well.
Owner Occupiers have also been extremely competitive, and subsequently certain requirements have been difficult to be met. For example, 1,000 sqm to 2,000 sqm buildings with hardstand are now unavailable in the market in most suburbs. Owner Occupiers have flooded back to the more central locations such as Welshpool, Kewdale and Canning Vale, absorbing the stock available and putting pressure on rents.
This has been great news for owners of industrial properties, who have not seen values appreciate for the past few years.
The leasing market has also been strong this year. With limited stock available, rents will begin to increase. We are expecting the demand to continue into 2022, which will see rents rise and intense competition for sites. As we experienced in 2008, along with the rent growth, we expect incentives to become almost non-existent.
Businesses sentiment is strong but unfortunately the demand for labour in the mining sector means businesses are struggling to meet their staffing needs. Once again, consumer confidence is rising but we feel the pressure on businesses due to employment opportunities and other external factors will limit the expansion of businesses in 2022.
An interesting year ahead!
“The positive sentiment has continued into 2021, with properties leasing quickly and sales being contracted within 24 hours due to high demand.”