Australian cities in world top 10 for industrial property rents

Three Australian cities are among the world’s most expensive places in which to rent industrial property, but a property expert claims that start-ups shouldn’t be overly concerned.

According to CB Richard Ellis research, Sydney, Perth and Brisbane placed 7^th, 9^th and 10^th respectively, with rents of $112.90, $105.75 and $103.12 per square metre for the second quarter of the year.

Tokyo topped the list, followed by London, San Paulo, Singapore and Amsterdam.

CBRE global chief economist Raymond Torto told The Australian Financial Review falling demand for industrial and logistics properties in 2008 and 2009 have brought rents back to 2003-2005 levels.

Robert Papaleo, director of strategic research at property consulting firm Charter Keck Cramer, says the research isn’t overly valid for start-ups.

“[CB Richard Ellis] would probably be looking at prime institutional-type industrial properties rather than the sort of properties that start-up businesses would be likely to have,” Papaleo says.

“They’d be industrial warehouses and distribution centres and factories – not obsolete, secondary industrial leftover bits and pieces that you’d typically find start-up businesses in.”

However, Papaleo says high rents will hurt larger businesses, which could affect start-ups.

“[Start-ups are] going to have be mindful of it because it will certainly be a significant overhead for a lot of businesses,” he says.

“I think there would be some indirect impact because obviously the rents at the top of the tree are going to filter all the way down.”

Papaleo says start-ups who do rent high calibre industrial property may have to think outside the square if the overheads get too large.

“I’m imagining lots of start-up businesses will be small businesses that don’t have the ability to move, pack up readily and go to another city, for example, that might not be as expensive,” he says.

“I think ultimately, start-up businesses – if they can’t afford the rents – will seek the next best alternative, which may in fact be working from home; the garage, the study or wherever it might be.”