The industrial sector's return languished at around 7,1% last year, which appears to be a result of pressure on rentals in secondary locations. Capitalisation rates in the same locations have also softened against those in prime areas, and this has resulted in values falling in portfolios exposed to the older industrial areas.
This trend emphasises the need for listed property vehicles to assemble strong portfolios.
Perkin says key trends in industrial property relate to size, location and security.
There is a demand for larger (3000m² and upwards) warehousing facilities that offer flexibility with re-leasing.
He says mini-factory complexes are too risky and management- intensive. There is renewed focus on proximity to customers and accessibility to road networks.
Tracking the growth of emerging areas is important when adding to a portfolio of new properties with strong growth potential. Perkin says secure industrial parks with sound management are attracting more corporations that marry their head office and warehousing needs.
Perkin says industrial rental growth has been limited in the past three years, which has affected earnings.
'However, there appears to be a take-up of vacant space in prime locations, and this should bring upward pressure on rentals as new developments are undertaken to accommodate demand.'