New breed of industrial tenants bring different demands

Wednesday, 7th Sep 2016

Perth’s burgeoning logistics industries are benefiting from a raft of major road upgrades, which is having flow-on effects for the city’s industrial property market.

In a bid to accommodate Perth’s forecast population of 3.5 million people, the state government has been proactive with infrastructure improvements that will help make the city a more efficient place to work and live.

The state has identified infrastructure spending to be a priority in its 2016/17 budget released in May.

Approximately $1.8 billion in 2016/17 will be spent on upgrading road infrastructure with an estimated $5.9 billion for the 3 years to follow.

Many of these road infrastructure projects are designed to support key industrial areas, making industry more cost competitive.

Such projects include the recently completed $1 billion Gateway WA development and the future construction of the $1.6 billion Perth Freight Link and the $1.1 billion North Link.

Together, these projects will create greater accessibility for many prime industrial zones linking the Fremantle Port, the Perth Airport and key metropolitan and regional markets to the city’s north and east.

The burgeoning transport and logistics industries, which are continuing to grow on the back of e-commerce, will benefit most from this improved road infrastructure.

These industries are helping to fill part of the gap in the industrial property market left by mining services firms, who have downsized or closed in the aftermath of the state’s mining boom.

The rise of the transport and logistics industries is good news for investors as this increased activity is helping buoy the industrial property markets.

However, as the state’s economy continues to transition away from the resources sector, these new industrial tenants require different property specifications.

This includes changes in truss heights and office/warehouse proportions that are more conducive to warehousing operations over engineering type uses that were required by mining services firms.

This has promoted a form of ‘design and construct’ investment where tenants are dictating the building configurations to landlords/investors so properties are built to their needs.

Investors with existing industrial properties need to be aware of the requirements of this new breed of tenant or face long vacancy periods because of outdated fitouts and property specifications.