Eastern European yields have continued to converge with those in the more established markets. Prime yields in Prague now stand at 8.25%, having fallen 100 basis points over the last year, while logistics yields in Warsaw have tightened by the same margin.Bolder investors are investigating opportunities amongst the next round of accession countries such as Bulgaria, Romania and beyond to Russia, albeit with caution, as a fundamental lack of local market knowledge as well as political and economic uncertainty remain as barriers.
2005 saw sustained industrial growth across Asia Pacific, driven by solid performance from key economic centres. The island state of Singapore continues to benefit from its advantageous geographical position. Industrial rents in the market remained stable in 2005 as a surplus of supply kept rental values in check. However, the market is forecast to witness a return to growth, as global demand for high-tech and electrical goods are anticipated to increase.
The Sydney industrial market looks set to continue to strengthen. Incentives are reducing and strong tenant demand led to the overall vacancy rate falling sharply over the last year. The opening of the M7 corridor in particular helped to fuel tenant demand.Strong tenant demand in the Melbourne market has already led to an escalation in rental values on larger units, while smaller occupiers have demonstrated a preference for owner-occupation. The limited availability of high grade investment opportunities and strong demand has continued to produce downward pressure on yields across both the Sydney and Melbourne markets.
Business sentiment among Japan’s manufacturers has improved and third party logistics operators are likely to become active in the Tokyo industrial market again, buoying demand after a long period of stagnation.