NVESTORS have been on a spending spree in Perth’s city office market in 2011, buying more than $180 million worth of properties in the first few months of the year.

Demand for large-scale industrial sites is driving the construction of purpose-built developments in the otherwise flat industrial property market.

With city office rents moving up, tenants are also expanding the office component of many of these projects to rein in accommodation costs.

The shortage of modern warehouse developments over 3000sqm is putting upward pressure on rents in this slice of the market, with Colliers International forecasting rental growth of up to 10 per cent in the next 12 months.

There are a number of factors exerting pressure on this part of the industrial sector, including the scarcity of big sites around the traditional industrial suburbs of Kewdale and Welshpool, as well as the shortage of funding options for speculative projects.

Colliers International industrial agency director Wayne Chorley said the majority of the tenants in Goodman Group’s Stockyards industrial estate had opted to go down the design and construct path after failing to find suitable properties in Western Australia.

Goodman has plans for a 27,085sqm distribution centre for Linfox Logistics at Stockyards and construction is under way on its 41,378sqm facility for Coca-Cola Amatil.

“The pre-lease or design and construct market is particularly strong in Perth,” Mr Chorley said.

“The office component of some of these bigger developments has grown because the newer estates like the Stockyards have a better standard of amenity.

“I think most big companies will still have a presence in the city but they are probably making a bigger component of their office in the industrial areas.”

He said the cost of parking was also an important consideration for companies, which did not have to pay for parking in most industrial areas.

A lack of suitable sites within WA’s established industrial precincts is likely to frustrate the expansion plans of some WA operations and may even force businesses to contemplate restructuring to include warehousing in other states.

But Savills WA industrial divisional director James Condon said the other pressure on tenants was their need for large ‘hard stand’ or open areas.

“The majority of developers are not prepared to build these properties for their tenants because it’s not maximising their return,” Mr Condon said.

“They don’t need a large amount of building area and that is where they (the developers) get a return.”

Mr Condon said the state government’s bid to rezone a number of sites around Perth for industrial use would hopefully provide some valuable new stock.

“But until that filters through and while the majority (of tenants) need to be near the key infrastructure … there will be a lot of pressure on the market.”