Surge in speculative industrial developments in the west

THE lack of industrial space in Melbourne's north and west is fuelling demand from tenants, with speculative developments becoming more popular in the west.

THE lack of industrial space in Melbourne's north and west is fuelling demand from tenants, with speculative developments becoming more popular in the west.

Colliers International industrial associate Tim Homes said that in the north it had been a busy first quarter, with strong demand for leasing stock larger than 3000 square metres. "This will continue to reduce the already short supply of stock," he said.

Mr Homes said the industrial strata market in the north had continued to strengthen over the past year driven by a rise in demand from small to medium occupiers wanting to be near big arterial roads such as the Metropolitan Ring Road, fast improving amenity in the area and competitive prices.

"The increase in traffic conditions and rising petrol prices has also seen a trend of occupiers working closer to home," he said. "Investors have also seen the benefits of buying an industrial strata property for their superannuation funds and have taken advantage of the depreciation benefits and great returns."

In the second half of last year, major leasing activity increased in the north, with seven tenants absorbing 50,384 square metres of space, according to Colliers research. Three vacant possession sales totalling $35 million took place between April and September.

In the west, Nathan Bingham, Colliers manager in charge of the region, said industrial tenants were increasingly looking to lock in space within spec projects.

A new five-year lease negotiated for space within a Derrimut industrial estate confirmed the trend towards off-the-plan leasing deals. Tapex had leased 4268 square metres at 47 Castro Way, within Makland Group's Paramount Industrial Estate, for $325,000 a year.

Mr Bingham said low stock levels gave occupiers little choice but to commit to developments under construction. "In most cases it is a win-win situation, as developers are minimising their holding costs and risk whilst occupiers are given the opportunity to modify the design of the building through the final stages of construction to suit," he said.

Colliers research showed more than 50 per cent of leasing transactions in the west were being secured this way.

Other recent examples included commitments by both Arlec and Freight Specialists to a combined area in excess of 25,000 square metres.