Private investors take charge in the south-east

Private investors are dominating Melbourne's south-eastern industrial market, accounting for 70 per cent of all sales over the past 12 months, according to Savills Australia.

Private investors are dominating Melbourne's south-eastern industrial market, accounting for 70 per cent of all sales over the past 12 months, according to Savills Australia.

The number of sales so far this financial year has almost doubled the transactions that occurred in 2010-11. But their total value was down slightly, Savills research suggests.

At least 47 properties were sold to March, up from the previous 12-month total of 36 and more than the five-year average of 40.

Their total value, $260 million, was down marginally from the $267 million sold the previous year and the five-year average.

Savills director Lynton Williams said the data indicated a healthy level of interest in the market.

"While there remains room for improvement, with the total volume of sales still trailing a little on previous years, there seems little doubt that interest rates have had the desired effect in Melbourne's industrial south-east," Mr Williams said.

"There is a current shortage of good quality industrial stock and this has and continues to entice local developers to proceed with speculative projects."

While leasing activity had slowed, sales had picked up, Jones Lang Lasalle's Andrew O'Connell said. "The basic feel of the market this year is there is definitely more sales activity than previous years."

Banks were more willing to lend, yields had tightened and sales were largely being driven by owner-occupiers, Mr O'Connell said.

Savills Victorian head of research Glenn Lampard said about 178,584 square metres of industrial accommodation was leased in the south-east in the 12 months to March. That volume was lower than the five-year average but up on the previous year (164,894 square metres), he said.

"If this leasing upswing continues to add to the excise of quality stock from the market, then the current shortage will be exacerbated, leaving lots of scope for developers to proceed with new construction," Mr Lampard said.

Savills' latest Industrial Spotlight report said market yields for prime industrial buildings were estimated to range between 7.75 and 8.75 per cent in the south-east while capital values had increased between 7 per cent and 25 per cent for all industrial regions since the bottom of the market in March 2009.

It found sales in the price range of $2 million to $10 million - the bulk of the south-eastern market acquisitions - totalled $339 million, which was greater than the 10-year average of $305 million.sjohanson@theage.com.au