Squeeze on industrial space
A survey of 615 industrial buildings (all larger than 10,000 square metres) covering 13 million sq m of space in Melbourne's north, west and south-east shows an even lower rate, 2.5 per cent, among prime and modern buildings, according to advisory group Urbis.
The low industrial vacancy rates were a "consequence of a lack of new supply that's been endemic in the market for the last five years since the GFC", Australand's industrial executive general manager Sean McMahon said.
That lack was putting pressure on potential tenants, given they had fewer choices, and was applying pressure on rents, he said.
Australand had built at least 100,000 sq m of speculative industrial space in key markets over the past 12 months to soak up extra demand, he said.
"There has been a lot of offshore interest in buying prime industrial assets," he said.
The Urbis survey found:
■Nearly half of the 13 million sq m was classified as "prime or modern" (built within the last 15 years), with 70 per cent of that space in Melbourne's west.
■Institutional owners control 35 per cent of available space, with the top five (Goodman, Australand, Dexus, Growthpoint and GPT) accounting for
3 million sq m.
■Thirty buildings were larger than 50,000 sq m, with 71 bigger than 35,000 sq m.
■The largest industrial occupier is Toll Group, with 300,000 sq m.
■About 37 per cent of space is used by manufacturers. Ford, Holden and Toyota account for 700,000 sq m, while Amcor, Visy, Caterpillar, OneSteel and CSR combined occupy a similar amount.
■Major retailers Woolworths and Wesfarmers occupy 550,000 sq m.
Urbis valuation director Shane Robb said the survey identified 390,000 sq m of vacant floor space, the majority secondary stock.
Rental growth for those buildings was likely to be limited but prime or modern buildings would have "greater opportunity for rental growth" within the short to medium term.
Vacancy rates in the north were peaking at 5 per cent, in the west they were 2.3 per cent and in the south-east 3.8 per cent.
Frequently Asked Questions about this Article…
Melbourne's overall industrial vacancy rate is historically low at about 3%. A more detailed Urbis survey of 615 larger buildings found an even lower 2.5% vacancy among prime and modern buildings. For everyday investors this indicates strong demand for quality industrial property and limited availability of leasable space in key markets.
The article cites strong investor appetite, limited new developments, and low debt levels as key drivers. Australand’s executive Sean McMahon also noted a five‑year lack of new supply since the GFC, which has tightened choices for tenants and put upward pressure on rents for desirable industrial space.
The Urbis survey covered 615 industrial buildings (each larger than 10,000 square metres) totalling 13 million square metres of space across Melbourne's north, west and south‑east, giving a broad picture of the city's industrial market.
Nearly half of the 13 million square metres was classified as 'prime or modern' (built within the last 15 years), and about 70% of that prime/modern space is concentrated in Melbourne's west—highlighting where higher‑quality industrial assets are located.
Institutional owners control roughly 35% of the available industrial space. The top five institutional owners named in the article are Goodman, Australand, Dexus, Growthpoint and GPT, which together account for around 3 million square metres.
The largest single industrial occupier identified is Toll Group with about 300,000 square metres. Manufacturers occupy roughly 37% of space—Ford, Holden and Toyota combined account for about 700,000 square metres. Companies such as Amcor, Visy, Caterpillar, OneSteel and CSR together occupy a similar amount. Major retailers Woolworths and Wesfarmers occupy around 550,000 square metres.
Urbis identified approximately 390,000 square metres of vacant floor space, mostly secondary stock. The report suggests rental growth is likely to be limited for secondary buildings, while prime or modern buildings have greater opportunity for rental growth in the short to medium term.
Yes. Australand has built at least 100,000 square metres of speculative industrial space in key markets over the past 12 months to help meet extra demand. The article also notes significant offshore interest in buying prime industrial assets.
Call 1300 880 160
Start a chat
Schedule a call
