Melbourne industrial rental market booming thanks to transport projects

Jonathan ChancellorSeptember 12, 2011

Melbourne leads the country in industrial rental growth as developers consider new projects in key transport hubs. 

CBRE’s latest Asia Pacific Industrial and Logistics MarketView shows that the overall trend was for a slowing in rental growth. 

Melbourne was standout in the CBRE Logistics Rental Index with the city recording the strongest quarter-on-quarter and year-on-year rent growth in Australia of 0.7% and 6.8% respectively. 

This was close to double the 3.9% year-on-year rent growth recorded in Perth, which had the second highest rental growth over the period, followed by Brisbane at 3.3%. This was followed by Adelaide at 1.7% and Sydney at 0.9%. 

On a quarterly basis, rents were stable in most markets, with the exception of Melbourne

CBRE industrial and logistics services senior director Dean Hunt says underlying demand from the import and retail trade sector has underpinned activity in the Melbourne market. 

“Further assisting is the reduction in vacancy, which is creating greater competition for space and the beginnings of a re-emergence in the speculative development sector,” Hunt says. 

In Sydney, the report shows that high Australian dollar was continuing to put pressure on local manufacturers. 

The movement of a number of large south Sydney tenants to cheaper markets in the western suburbs has kept a lid on Sydney rent growth in 2011. 

“In Sydney, a shortage of supply in the outer west is spurring development in response to the emerging trend for a number of larger South Sydney tenants to relocate to the sub region to lower their real estate costs,” says CBRE industrial, logistics and investments regional director Joshua Charles. 

Small-scale development has returned to Adelaide as demand for smaller units and sites increases in well-located areas. 

In Brisbane there was little change in rents as the market continued to absorb existing stock and companies took longer to negotiate lease agreements. 

However, with the Brisbane development pipeline having dried up, the report tips some upward pressure on rents for large facilities in coming months and re-emerging interest in design and construction options.

Jonathan Chancellor

Jonathan Chancellor is one of Australia's most respected property journalists, having been at the top of the game since the early 1980s. Jonathan co-founded the property industry website Property Observer and has written for national and international publications.

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