Commercial property in hot demand

Chairman of REIWA’s Commercial Agent’s Network Mr Russ Parham, said the price pressure was coming from the lack of available property in the face of unprecedented demand.

"The past three years had seen extraordinary and continuous growth in the commercial and industrial sector, cutting right across industrial land, office and retail space," Mr Parham said.

Mr Parham said economists and property analysts believe the demand for commercial and industrial property is likely to continue for some time due to the global appetite for West Australian resources.

The REIWA Report shows the statewide level of transactions is presently 16 per cent below the 2005-06 year, with metropolitan Perth down by 20 per cent.

Mr Parham said it was unlikely the total level of reported sales numbers in 2006-07 will surpass the earlier years while the value of transactions may well eclipse the $3.78 billion recorded in 2005-06.

"However, the value of commercial, industrial and retail transactions is up 21 per cent and 57 per cent respectively in 2006-07, but is still not adequate to offset falls in the value of offices, land and other sales activity at this stage.

"The likely shortfall in sales volume in 2006-7 is not reflective of a market in decline, rather it is more about but lack of supply given that inquiry levels remains high.

"We are witnessing the extraordinary situation where the volume of transactions is down but the value of turnover is up," Mr Parham said.

As a new initiative, REIWA has undertaken a detailed analysis of strata title property that includes factories, warehouses and showrooms which found the average square meter floor rates across the metropolitan area increased by between 50 and 77 per cent over the past two years, reflecting the tight supply situation.

Mr Parham said said this data collecting method was an attempt to provide trend measures for commercial and industrial property prices and overcome some of the difficulties in reporting commercial activity where each property tends to be unique.

"REIWA is keen to get a method for reliability and consistency in data collection for commercial and industrial property, acknowledging that there is no uniform rule you can apply to such a diverse sector of the property market," Mr Parham said.

REIWA notes there is continued concern within the industry regarding land supply for the commercial and industrial sector, which has also seen strong price growth the past two years.

"There are questions around what the likely lot production potential is in the foreseeable future.

"While the pressure for residential land has eased, this is not the case for commercial and industrial sites," Mr Parham said.

Mr Parham also noted that building approvals in this sector had been growing over the last five years, suggesting that a supply and demand crunch was not far away, if not already here.

"Any failure to adequately supply the release of land for commercial and industrial growth will stymie building activity," he said.

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Marc Pallisco

A former property analyst and print journalist, Marc is the publisher of realestatesource.com.au.

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