Melbourne industrial rental growth leads Asia Pacific: CBRE

Melbourne’s industrial rents topped quarterly growth in the Asia Pacific region, according to the latest report by CBRE.

Melbourne’s warehouse rents grew 1.4% in quarter three, to $83.2 per square metre per annum.

This isn’t close to Sydney’s industrial rents, which are at $125.8 per square metre despite a year-on-year decrease of 0.9%. They increased 0.3% in quarter three.

Rental growth in Melbourne was driven by rent rises in the west and inner suburban market, with Melbourne’s overall industrial prime rental now averaging $84.50 per square metre, the report found.

“While leasing activity has remained relatively subdued there is a lack of available, quality stock in prime locations and this has been driving rental growth,” says CBRE regional director of industrial and logistics services Joshua Charles.

“Demand is being driven by logistics and distribution groups and is focused on the west, where cheaper land values are helping to facilitate design build projects and pre-leasing activity.”

The report found that rental growth has accelerated through the wider Asia Pacific Region, with CBRE’s Logistics Rental Index growing by 2% quarter-on-quarter in the third quarter, following 1.4% growth in quarter two.

“This growth was largely due to the strong performance of key Greater China markets, where retailers have been competing to secure quality logistics space in prime areas in anticipation of the peak retail sales period during the lunar new year in January,” the report found.

In Sydney the west sub-region continues to attract occupiers with cheaper land that is close to major transport links.

Sydney’s prime industrial rents remained stable in quarter three with a decline in demand from manufacturing groups offset by increased demand from distribution-related occupier.

“Secondary locations and properties which do not suit modern logistics operators will struggle going forward,” says Charles.

Brisbane experienced increased demand for new and larger units, particularly in well-located areas around the Gateway precincts, and this led to a slight growth in prime rents.

Resource-focused or distribution companies’ preference for modern facilities led to a fall in demand for secondary stock. Speculative development has remained on hold, with financial institutions still requiring a pre-commitment level of up to 80%, according to the report.

In Perth prime industrial rents remained steady as demand from resource-linked occupiers began to outweigh the decline in demand from manufacturing tenants.

Supply remained limited, particularly in the eastern sub-region for properties over 3,000 square metres.

“Given the tight supply pipeline, schemes targeting larger occupier requirements such as Jandakot City and Stockland Industrial Estate are reaping the rewards and land values could increase over the coming months, especially in light of a reported easing in financing restrictions,” Charles says.

Cautious occupiers in Adelaide led to limited demand for industrial accommodation but demand remained strong for well-located buildings close to the airport and in the north-west district. Buildings in secondary locations remained difficult to lease.

“Development finance and the lack of land available for sale remains the hurdles for Adelaide’s supply pipeline,” the report found.

In Canberra prime industrial rents remained stable but leasing activity was subdued. Capital values fell due to the softening of yields in Hume and Mitchell in particular, according to the report.

“Development is presently restricted to refurbishment projects, with very limited new development in the immediate pipeline,” the report found.

In the wider Asia Pacific area, rental growth accelerated in quarter three and capital values increased at a slower pace.

There were slight increases in land values in most Australian markets, with Melbourne recording the strongest growth.