Shortages Will Prop Up Rentals
Sydney Morning Herald
Saturday November 1, 2008
THE chief executive of Dexus, Victor Hoog Antink, has warned that the industrial property market will feel the pressure of the weakening economy next year, although the lack of supply will keep a base under rents and demand.
Speaking at the group's annual shareholder meeting this week, Mr Hoog Antink said that while the group's Australian industrial portfolio was continuing to perform well, the overall industrial property market was slowing, and it was expected that take-up next year would ease. "In anticipation, we have already negotiated over 22,000 square metres of space which is not due to expire until after June 2009." Dexus has $4.5 billion of industrial assets under management, with key developments in both the Sydney and Melbourne markets.According to Savills' third-quarter industrial report, industrial owner-occupiers, long shut out of the Sydney industrial property market because of intense competition from institutional investors, stepped up buying during the year to September.The author of the report, Claire Cupitt, said overall buying activity dropped, most notably from institutions. Some owner-occupiers and private developers stepped into the breach.The weak NSW economy, a depressed housing market and lower retail spending were all contributing to slower industrial activity, said Nick Crothers, the national industrial analyst at Jones Lang LaSalle."Tenants and landlords have been opting to renegotiate leases early. This way, landlords are avoiding vacancy issues, and tenants are avoiding having to spend capital," Mr Crothers said. "The data for the third quarter demonstrates this trend." Only four major tenant moves were recorded in the three months to September, he said, accounting for 31,420 sq m. "There has been a lack of major pre-commitment deals that have driven strong take-up in the past."Matt Herrett, Jones Lang LaSalle's national director and head of NSW industrial services, said developers were reluctant to build. "Construction costs are now at a point where developers are unwilling to build for a loss at current rental rates. Most tenants are just not in a position to commit to paying a premium for new premises in the current environment."
© 2008 Sydney Morning Herald