Key findings:
- As at June 2016, the national industrial vacancy rate as recorded by IPD WAS 4.0%. This is up from 2.6% at December 2015 and the highest industrial sector vacancy level in five years ever since a figure of 4.0% was recorded for the first half of 2.11.
– As at June 2016, the net income growth was recorded at 8.7% – the highest since mid-2012.
– The 2.5% base rental growth recorded for the six months ended June, filtered through into a lower capital growth of 0.5%. The fact that the full base rental growth isn’t filtering through to capital growth, means that valuers are taking a slightly more bearish view of the sector’s future earnings.
– On a segment level, standard industrial units came under some pressure during the last six months and recorded a negative capital growth of -1.7%.
– Whilst the industrial sector vacancy rate remains low at 0.4%, the weakening occupancy rate experienced during the last six months will be concerning as questions remain around the demand-side economic fundamentals underpinning the sector.
– Industrial manufacturing volumes remain constrained with the global economic slowdown, the weak local economy and lower commodity prices all playing a role. For the year ending June 2016, manufacturing volume growth was marginally positive but on an index basis is still 10% off pre-recession levels. Industrial supply remains well below peak levels of 2007/08 and is the driving factor behind the still slow vacancy rate and decent rental growth.
– Whilst the vacancy rate of all industrial segments were below 3% as at June 2014, the last two years have seen some segments come under increased pressure.
– Industrial standard units in particular, have experienced increased stress on net income growth. Since mid 2014, the rate of net income growth for standard units has dropped from above 10% to 4%, driven by a higher vacancy rate.
– Analyzing industrial property by box size, reveals that there is currently more space available on the lower and upper ends of the size scale. The lowest vacancy is currently in the mid-size segment of 5k sqm – 10k sqm.
– Whilst the aggregate industrial vacancy rate remains fairly low at 4.0%, there is a significant variance between nodes. Some nodes currently offer virtually zero available space and in most cases, these nodes are also seeing improvements in rental growth momentum.
Read more here: SAPOA Industrial Vacancy Report October 2016
