Host, Ray White head of research Vanessa Rader, was joined by RWC WA director of capital markets Brett Wilkins to shed light on how each commercial asset class is performing in Western Australia.
Mr Wilkins is behind Western Australia’s largest commercial real estate deal, being the sale of Jandakot Airport for $1.3 billion in 2021.
Mr Wilkins said industrial was still the hottest asset class post-Covid.
“Vacancy is more or less zero, and there is still good, solid demand,” he said.
“There is lots of demand off the back of mining and general economic activity.
“Yields have been blown out but that has been more than overcome by increased rents.
“There’s strong demand from both owner occupiers and investors. Industrial is holding up really well.”
Ms Rader said there were not too many large industrial transactions occurring in Western Australia, and asked Mr Wilkins how that end of the market was performing.
“The majority of Perth industrial is held by families, and a lot of institutions want to spend the money here, and if they could get something of size then they would spend,” Mr Wilkins said.
While there is some new industrial supply being added to the market, Mr Wilkins said there was a shortage of industrial land.
“You have to go a long way out of Perth now to get to some of the industrial subdivisions,” he said.
“There is construction activity happening because the rents and the demand just overcome the obstacles on the construction side of things.”
When it came to Perth’s office market, Ms Rader said Perth had behaved quite differently when it came to the work-from-home trend which had kept occupancy higher.
Mr Wilkins said there was still reasonable demand for office investments.
“The demand is there, but it’s harder to work out where the values are at today,” he said.
“We have very high incentives and they haven’t shifted, they’re still averaging 50 per cent.
“Yields have shifted due to the cost of debt, but there just haven't been many transactions.”
“West Perth is strong with smaller investors and owner occupiers.
“There has definitely been a flight to quality, and some of the West Perth offices have been keenly sought after.
“Anything to do with small cap mining, traditionally centred at West Perth, is strong.”
Mr Wilkins said the retail market was performing well with low vacancy rates.
“Most of the retail strips where there are vacancies,
it's mostly because landlords don't want to meet the market for rents,” he said.
“Retail strips are very keenly sought after from tenants and definitely from investors.
“Yields are sitting between 5-7 per cent, but some retail strips like Napoleon Street in Cottesloe or Bayview Terrace in Claremont where demand from
investors looks beyond the current interest rate cycle that we’re in at the moment.
“Larger retail went through a change when Covid came along, regional centres and subregional centres were on the nose at the time, neighbourhood and convenience retail hit the peak.
“I’m getting 3-4 inquiries a week about convenience centres. They’re super popular.
“Regional shopping centres are now back in demand, but they have become more entertainment centres.”
Mr Wilkins said the demand for healthcare assets was huge.
“Healthcare is up there with industrial as the hottest asset class out,” he said.
“I have sold approximately $150 million in healthcare properties in the past two years, buyers were mostly funds from the east coast and Singaporean private investors.
“The assets included medical centres and a couple of private hospitals.
“Activity has slowed down over the last six months but there’s still a strong demand and that won’t dissipate.”
Ms Rader asked Mr Wilkins if he had seen an increased demand for commercial property from eastern states investors.
“At all levels of the market, there has been increased demand from the eastern states in the last year, from small private investors to larger institutions,” Mr Wilkins said.
“People are attracted to the value for money, yield differential and the indication that the WA economy is very strong and they should invest here.”
Mr Wilkins said foreign buyers were still looking to invest in Perth across all asset classes.
“Traditionally Perth is home to Sinaporean, Indonesian, and Malaysian money, there’s not as much investment from Hong Kong, China, or elsewhere.
“Covid stopped that for a few years, but Singaporean investors are starting to look at Perth again, but transaction activity overall has obviously started to slow down.
“Singaporean buyers tend to love Perth hotels, but they will purchase shopping centres, industrial, vineyards, all sorts of assets.”
