Melbourne industrial developers trying to stand out as rents stabilise: HTW

Melbourne industrial developers trying to stand out as rents stabilise: HTW
Melbourne industrial developers trying to stand out as rents stabilise: HTW

With the industrial multi-unit development market becoming saturated in Melbourne’s well regarded industrial suburbs, developers are looking for new ways to set their product apart from the competition, according to Herron Todd White (HTW).

The valuation firm noted recent times had seen adaptable spaces with brighter designs.

"Developers will modify the spaces to meet the purchaser’s requirements," the September HTW industrial report noted.

"Such product is being strongly supported by investors assuming strong WALEs and owner-occupiers looking to operate their small businesses or meet their ever- growing storage needs."

HTW also noted the strata industrial space was also being driven by the requirement to redevelop dated and functionally obsolete industrial properties into smaller, concrete tilt panel strata developments.

Most industrial strata spaces comprise a mix of concrete tilt panel and aluminium glazed facades to provide natural lighting and in turn, a positive work environment for their occupants.

"We are seeing strata industrial developments continuing to grow in the inner-city markets, particularly in the inner west, north and east, due to high land values in these areas."

An example of an industrial infill development is 10 Cawley Road, Yarraville 3013, where 50 small strata units have been constructed to provide both self-storage and office/warehouse unit accommodation (ranging between 107 and 203 square metres).

Another development which is combining small scale storage units and high-tech office/warehouse units is The Assembly, located at 329 Bay Road, Cheltenham 3192 (pictured above).

The development is nearing completion with most units being secured by pre-commitment sale transactions prior to completion.

The development focuses on being aesthetically pleasing, as demonstrated by the architecturally designed units and incorporating vertical garden walls, as well as being pragmatic at the same time, creating the perfect balance for occupants.

Where larger land allotments are more readily available and affordable, such as in the outer west and south-eastern markets, HTW suggested there has been an increase in large scale distribution centres being constructed, particularly within proximity of major transport routes.

"As the online shopping market continues to develop, many businesses are seeking to expand their operations to incorporate options for distribution to their customers," the report said. 

"Smaller office to warehouse ratios are being constructed to coincide with technology advances and work-life balance, with employees able to work from home, creating a reduced requirement for high office to warehouse ratios in part."

Aside from the above, currently planned infrastructure upgrades and road projects will benefit the industrial corridors across Victoria and the sector as a whole.

"Projects include the Western Ring Road upgrade, CityLink Tulla widening, West Gate Tunnel project and the anticipated North East Link project.

"The completion of these upgrades will positively impact the aforementioned growth corridors across Melbourne and allow for further efficiencies with regard to transportation and logistics, particularly with regard to the growth in e-commerce and the importance of distribution centres.

"These infrastructure upgrades are creating stable links between destinations, reducing the risk of contingency when transporting goods.

Across the industrial market, rents have continued to stabilise with little movement noted by HTW.

Yields on  the other hand are a different story, in particular well-located investment properties with strong lease covenants and WALEs, with yields continuing to firm.

"We expect that with the supply of englobo industrial land throughout Melbourne, industrial developments will continue to meet demand for both owner- occupiers and investors."

Melbourne Industrial

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