Market recovery is now more broad-based after being led by big retailers and logistics companies and rents have moved into growth phase, according to Jones Lang LaSalle’s Q3 2010 statistics.
Many monitored industrial markets returned to positive rental growth in the third quarter of 2010, Jones Lang LaSalle’s Q3 2010 research statistics show, as a broad-based recovery in demand emerges and supply remains low.
Gross take-up of industrial space was solid in Q3 2010 at 241,100 sqm – demand improving.
Only 252,100 sqm of new industrial space was constructed in Q3 2010 – supply remains low.
Many new projects are starting construction due to strong pre-lease activity.
There is now 369,100 sqm under construction and scheduled to complete Q4 2010.
Prime grade rents either stable or rising modestly in most monitored markets on average.
Sales activity continues to build pace with 27 properties worth $431.4 million sold in Q3 2010 compared to 37 properties totalling $397.2 million in Q2 2010.
Michael Fenton, National Head of Industrial at Jones Lang LaSalle believes that there will be further rental growth momentum and more investors will return to the sector as the outlook improves going into 2011.
“We foresee a return to moderate rental growth in most markets over the next twelve months,” said Mr Fenton. “This is already evident in more supply constrained markets such as South Sydney and the East of Perth, where prime grade rents have rebounded strongly this year as demand conditions improve.”
Industrial rents either continued to stabilise or have bounced a little in Q3/2010. Average prime grade rents increased 4.3% in South Sydney, 3.2% in Perth East, 1.5% in Melbourne West, 0.3% in Sydney OCW, 0.2% in Brisbane Southern and 0.4% in Sydney North. Prime rents decreased 1.8% in Perth South.
Gross take-up of industrial space was 241,100 sqm in Q3 2010. This is below the very strong 441,000 sqm recorded in Q2 2010 (many large pre-lease deals were recorded in Q2 2010).
Nick Crothers, national industrial analyst at Jones Lang LaSalle said that take-up activity in Q3 2010 was driven by a broad mix of occupier types: transport and storage, manufacturing, construction, communication services and the retail trade sector.
“This indicates that there is a broad based recovery underway around the country in industrial occupier demand that had previously been lead by the big retailers and logistics companies,” said Mr Crothers. “Once again we recorded the most take-up activity in Melbourne (37%), then Brisbane (25%) and Sydney (23%).”
Some of the largest occupier moves recorded include:
Caterpillar leased 30,700 sqm at Somerton Logistics Centre (Melbourne North).
Linfox leased 28,000 sqm in Heathwood (Brisbane Southern).
TNT committed to a new 18,800 sqm development at Welshpool (Perth East).
Equinix Australia leased 18,000 sqm in Mascot (South Sydney).
EB Games took up 17,200 sqm at Eagle Farm (Brisbane Trade Coast).
Techtronic Industries (Ryobi) pre-leased 15,300 sqm at Erskine Park (Sydney Outer West).
“We are now likely past the low point in the industrial supply cycle and from now on construction activity will continue to build pace. At present, with the exclusion of Melbourne where there is some speculative development underway, supply in most cities remains led by tenant pre-commitments. We expect this to remain the case due to prudence from developers and financial institutions. However, it is highly likely that we will see one-off speculative projects emerge in Sydney soon, and perhaps in Perth and Brisbane in the coming months,” said Mr Crothers.
There was 252,100 sqm of new industrial property built in Q3 2010. 244,800 sqm of this had known pre-commitments (97%). There was 369,100 sqm under construction and scheduled to complete in the last quarter of 2010 – 83% of which was pre-committed.