Media Release - January 27 2010

New tenants lift confidence

Property developer Lang Walker is winning new tenants for his industrial estates. Toll NQX has just taken a 20,000 square metre block on Walker Corporation’s Vicinity Industrial Estate in Adelaide’s north; KSB Australia and Caltex Australia will lease new buildings on the $1 billion Citiswich Business Park in Queensland; and Walker is negotiating more than 51,000 sqm of new space on the Monaro Industrial Park in Canberra.

"On all our industrial estates we have seen good activity," he said. "The improvement in confidence is in the early stages but it is starting to pick up quite quickly."

Walker has 600 hectares of industrial land in Brisbane, Sydney, Canberra and Adelaide. (But not in Melbourne, which Mr Walker considers oversupplied.)

Like the Vicinity Industrial Estate, which is 3 kilometres from the entry to Adelaide’s new $560 million Northern Expressway, all have been carefully positioned.

"The choice by big Australian groups like Toll to work with us illustrates our commitment to delivery and the strategic selection of our industrial sites on key transport routes and where government is investing in major infrastructure," Mr Walker said.

The global financial crisis has reworked the equation for industrial development. Rents have not changed much; in Canberra, Adelaide and Queensland, the rule of thumb is about $100-$110sqm net.

Nor have building costs. But land values have dropped considerably and finance remains "expensive".

Mr Walker said that some of the "silly prices" in western Sydney had come back 50 per cent.
"If you pay $200-250 sqm for the land, there is no margin at a rent of $110-$120 sqm net," he said.

But some developers had paid $300-$400 sqm and then been hit by the double whammy of overheated construction prices.

The downturn was "something that needed to happen" he said.

Mr Walker has bought one property since the collapse, a 30 ha site at Murrumba Downs in Queensland, which is now the North Point Business Park.

"The market in this area, close to the Bruce Highway, is ripe for owner-occupiers and savvy investors," Mr Walker said. Already 30 per cent of the first stage is committed, including a deal with a spare parts manufacturer.

However Walker Corporation, which sold more than $1 billion worth of property ahead of the collapse, has not made the big post-crash buys many expected.

"I have been very cautious. You don’t know where the market will go," Mr Walker said. "It could double dip. If there is another hiccup, the banks will tighten up and I would not like to be exposed if there was a second wave.

"It will be a long time before we see the heady days of 2007. There is no need to hurry to put your foot on land."

Walker’s interest in Amcor’s Alphington Mill site – the chance to create a $1 billion new suburb in inner Melbourne – has cooled.

However his group is seeing renewed interest from Melbourne’s office tenants, with the Australian Taxation Office signing up for the $750 million Walker/Kuok development of 735 Collins Street.

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