Multinationals snapping up industrial space in Melbourne's west

Demand for industrial space in Melbourne’s west is exceeding available supply due to a surge in multinationals taking up space, according to Colliers.

The industrial suburbs of Brooklyn and Derrimut are proving popular, with a series of major deals negotiated recently by the real estate group. 

Relocation multinational Australian Vanlines and freight and storage group Mountain Industries have both signed leases in an industrial park at 1 Cawley Road in Brooklyn. 

Both companies will lease about 4,000 square metres of “container-rated hardstand” space, with Australian Vanlines signing a five-year lease at $173,200 per annum and Mountain Industries signing a three-year lease at $140,000 per annum. 

Other tenants in the industrial park include multinationals Coates Hire and John Deere. 

Colliers International senior executive Nick Saunders says the leasing deals are evidence of an emerging trend in the area. 

“There is continued pent-up demand for tenants wanting warehouses in the inner west, but with very little stock available it’s becoming ever-frustrating trying to place the enquiry that were are handling,” Saunders says. 

Melbourne’s west has already been one of the few industrial zones to attract speculative development, with Australand completing three speculative projects in the precinct earlier this year. 

CBRE’s Victorian director of industrial and logistic services Walter Occhiuto says there are very good opportunities for speculative development, “particularly given the demand from major retailers who are currently driving strong levels of pre-lease activity.” 

Other multinational that have taken up leases of space in the west include O’Brien Glass, which has signed a seven-year lease at $145,000 per annum for a 1,800-square-metre main road building at 712 Geelong Road in Brooklyn. The warehouse was previously occupied by Toyota Materials Handling. 

“O’Brien Glass saw an opportunity to expand their operations in Melbourne’s west, upgrading from an 800-square-metre office / warehouse a few hundred metres up the road,” Saunders says. 

Australian Graphics, a subsidiary company of Wesfarmers, has signed a three-year, $77,800 per annum lease for 868 square metres at 144 Australis Drive, Derrimut. 

“They are expanding out of Altona North to a brand new building which was leased off the plan,” Saunders says. 

CBRE executive director of global research and consulting Kevin Stanley says the strength in Melbourne port trade has helped stabilise industrial rents and build demand for industrial property. This has helped drive rental growth during 2011. 

Stanley expects industrial yields to compress by around 40 basis points per annum –“a very conservative estimate and one which is likely to spark some debate”. 

“The question will be whether the market comes in and buys stock more aggressively and pushes values up faster that what a traditional compression cycle would suggest.”

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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