Slowdown hits small end
The slowdown in WA's economy is leading to higher vacancies and lower rents for small industrial properties in Perth, according to research by Ray White Commercial.
Ray White Commercial Burswood managing director Russ Parham said the fall in demand for small industrial units had been sudden.
"The market has turned around rapidly over the past 12 months," he said. "There's been new stock coming into the market, plus consolidation and contracts finishing. I've seen this cycle two or three times now since I started in 1977.
"It's not alarming, it's just a situation where there is more stock than we have seen for a decade."
While the research in the company's Between the Lines paper tracks small industrial units of less than 1500sqm, most of the surplus is units under 500sqm.
"People buy a block but they are nervous about a 1000sqm or 1500sqm development, so they put three or four strata units on and that's part of the reason for the oversupply," Mr Parham said.
Vanessa Rader, head of research for Ray White Commercial said suburbs with the highest volume of empty stock included Wangara, Malaga and Osborne Park.
Between the Lines monitors 724 leases accounting for 402,161sqm of vacant space across the metropolitan area.
"More than half of these listings are located in the north, while the east represents 33.4 per cent and the south 15.5 per cent," Ms Rader said.
Wangara, Malaga and Osborne Park account for 65.8 per cent of the total vacancy in the north - or 135,263sqm of stock.
Investment in small industrial buildings by self-managed superannuation funds has contributed to higher supply but not to oversupply, Mr Parham said.
He said the higher vacancy levels meant there had been some compression in average face rents across the metropolitan area while incentives were back after a long absence.
"A year to 18 months ago there were no incentives at all at the bottom end but now because of the amount of stock, people are having to offer incentives," he said.
"Rent-free periods of up to three months on a three to five-year lease and other incentives, depending upon the property, have also been offered to prospective tenants."
Mr Parham said development of small industrial units was likely to slow.
"There's a lot of land at Northlink in Wangara and a little bit of land at Forrestdale, other than that, there's almost no industrial land coming on.
"So there will be a natural slowdown, particularly in the eastern and southern corridors.
"In the northern corridor, if they keep building out there, particularly in Wangara, we are going to end up with an oversupply that will just push prices down."
Mr Parham said in the past small businesses had been quick to return to the leasing market when confidence returned.
"People will start to commit and half of that stock will get taken up in a three or four month period," he said.
