Rising market spurs Salta on warehousing

Salta Properties will begin major earthworks for warehouse sites at its "inland port" in Dandenong South as Melbourne's industrial market sales, supply and lease conditions improve in the first three months of this year.

Port container (TEU) volumes have grown by 9 per cent in the past year on the back of rising import demand from the retail and housing sectors, CBRE's latest Market Outlook says.

Salta Properties hopes to tap into the rising demand and improve freight distribution efficiency across Melbourne by opening 260,000 square metres of land next month for pre-lease developments in the first stage of its Portlink Estate development.

It will add significantly to the supply of industrial space which is expected to rise this year compared to last, but the amount available would remain in line with the 10-year average of 556,000 square metres, CBRE said.

Portlink Dandenong South is one of two major inland ports being developed by Salta which, when combined with its sister Altona Estate in the west, will add 2 million square metres of developed land to the market, with an end project value above $1 billion.

Salta alliance partner Qube had already committed as the anchor tenant at both estates, managing director Sam Tarascio said.

He said the company's inland port strategy responded to the state government's concern about traffic congestion on Melbourne's arterial roads and its guidelines for the future of freight transport.

CBRE said about 60 per cent of the new supply expected to become available in 2013 was from speculative development. Institutions such as Dexus and Goodman were hoping to cash in on improved tenant demand for large distribution and warehouse facilities.

Rental growth in the west has also been strong. A-grade rent averaged $75 per square metre and B-grade $60 per square metre in the first quarter of this year.

"The average A-grade rental rate for Melbourne is $90 per square metre, which offers discounting opportunities for developers and owners located in the west," CBRE said.

Yields across all asset classes in the west compressed during the quarter while capital values performed well, the report said.

"Listings of prime industrial properties in this market have fallen, indicating that investors are keen to hold on to assets with a longer-term view to an improving capital value," it said.

Knight Frank agent Joel Davy noted a rise in transactions at MAB Corporation's business park in Ravenhall. Most buyers were developers taking advantage of historically low prices.

sjohanson@fairfaxmedia.com.au