Ongoing economic growth contributing to Melbourne's industrial market
Melbourne’s industrial markets are likely to benefit from ongoing economic and population growth, strong retail trade and proposed infrastructure projects, according to Cushman & Wakefield's latest report.
Given the strong fundamentals and limited available stock in general, competition to secure investment assets will remain strong over the near term which may prompt further, though modest, yield compression, the report advised.
"Melbourne’s occupier market remains active, driven by manufacturing, logistics, and, postal and warehousing sectors.
Available space in the East/South East markets remains tight, as such most of the larger scale leasing activity has been in the Western market.
Anmar and Isuzu trucks have most recently committed to a purpose-built facility (37,000 sq m) in DEXUS’ Industrial Estate on Foundation Road, Laverton North," the report stated.
"In reflection of limited vacant space, prime net face rents in the East and South East markets have shown strongest rental growth, increasing by 11% and 12% over the last six months to $90-$100 and $85-$95 per sq m respectively for assets
Melbourne industrial investment totalled $200m in Q1 2017, a considerably stronger result than the $95m recorded in Q1 2016," the report commented.
Rolling annual investment volume increased 12% q-o-q, largely as a result of investment in the West being above the longer-run average over the past twelve months.
"The West recorded the largest investment volume for the second consecutive quarter, with much of the $115m in Q1 underpinned by Deutsche Asset Management’s acquisition of 45 Fulton Drive, Derrimut for $36.1m, coupled with Cache Logistics Trust’s purchase of 217-225 Boundary Road, Laverton North for $22.2m.
In light of strong investment into the West, prime yields in this market have tightened 25-50 bps over the past six months to 6.25%-6.75%," the report stated.
However, yields remain tightest in the South East, reflecting strong competition for limited quality stock.