Industrial market to benefit from Western Distributor project in West Melbourne

Industrial market to benefit from Western Distributor project in West Melbourne
Industrial market to benefit from Western Distributor project in West Melbourne

Infrastructure growth is a key demand driver in the Melbourne industrial property market and as a distribution hub, the West has benefitted from its excellent road infrastructure, according to Colliers International’s latest report.

Freight volumes have continued to expand over the years and so has the need create a more efficient system to move freight in and out of the port.

Intermodal freight terminals have gained traction on the back of this, with Salta’s Nexus Industrial in Altona being one such development.

Industrial assets should also benefit from the Western Distributor project which is currently underway and includes upgrades to the West Gate freeway and Bolte Bridge ramp, in addition to a connecting tunnel to the Port of Melbourne, CityLink and the CBD.

Tenant enquiry has more than doubled over the last 12 months, where the majority of this demand was concentrated on properties above 5,000sqm and smaller lots below 3,000sqm.

Demand has been strong over the year, with a significantly larger proportion of tenants enquiring for purposes of expansion and relocation in comparison to 2015, mainly for immediate tenancy.

While tenant demand has intensified, the in flow of speculative development has continued to wane, with the remaining speculative stock available for lease split between Frasers Property and the Goodman Group.

Prime Grade Net face rents are currently in the $70-80sqm range, while Secondary Grade assets range between $50-60sqm. Based on current levels of tenant enquiry, we expect to see solid growth in rents over the medium term, as renewed tenant interest from strong infrastructure and business expansion tightens vacancy in the market.

The pipeline for land supply has also thinned, with ready to go, subdivided land in limited stock. There are currently only four estates that have titled land and we expect  five more estates to come online in 2017, 60 per cent of which has already been sold.

The lack of available properties in a competitive environment should continue to reinforce growth in land values, which should translate into solid capital growth and further yield compression over the next 12 months.

Colliers International West Melbourne

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