Melbourne, 30 July 2014 – A flurry of new infrastructure developments slated for Melbourne will underpin growth in the city’s industrial property market, according to new research by CBRE.
The 2014 Industrial MarketView Q2 report predicts strong commitment from the federal and state governments to undertake major infrastructure projects in the Victorian capital will provide a strong base growth for the surrounding industrial market.
By the end of 2014, 380,090sqm of buildings over 5,000sqm are forecast to be added to Melbourne’s industrial market.
CBRE Research Manager Mark Lafferty said the scheduling of key infrastructure projects would provide a welcome boost of confidence to the sector.
“While there is some uncertainty around the funding for some projects, the strategic direction and priority appear to be clear,” Mr Lafferty said.
“As a result, the surrounding industrial markets are positioned to benefit from a lift in investor sentiment levels, as well as stronger demand for industrial space.”
Major projects earmarked for Melbourne include the multibillion-dollar East-West Link project and a potential third airport.
Mr Lafferty said the western industrial market was positioned to capitalise on the landmark infrastructure project.
“Once delivered, this project will improve access from the west to the Port of Melbourne, decreasing travel times by 15-20 minutes,” Mr Lafferty said.
“The proposed road link will increase the efficiency and attractiveness of this section of the Victorian industrial market.”
CBRE Senior Director, Industrial & Logistics Services, Dean Hunt said the occupier market would also considerably benefit from infrastructure improvements.
“At present, there is a significant level of transport movement between the south/eastern region of Melbourne and bulk storage/warehousing in the western precinct,” Mr Hunt explained.
“The East-West Link provides not only a second option to cross the river, but the benefit of reduced congestion and improved travel time.
He added: “Improved infrastructure will only assist in capturing more of the national occupier footprint in Victoria.”
In evidence of Melbourne’s strengthening industrial market, the report shows the Victorian capital experienced the highest volume of industrial sales after Sydney during Q2.
In the three months to June 30, $188.3 million in industrial property changed hands across Melbourne, the highest Q2 figure since 2011.
The sale of 251 & 261 Salmon Street for $28.25 million was the largest individual property transaction in Victoria over the quarter, representing an initial yield of 8.31% and WALE of 5.5 years.
CBRE’s National Director, Industrial Investments, Chris O’Brien said while there was strong demand for secure industrial investments in the form of Super Prime assets, there was growing appetite for those weighted with more risk.
“Given the progressive compression in Prime/Super Prime yields, we are finding an increasing appetite for non-core industrial assets with leasing risk/value-add attributes. This has been a strategy for investors to increase their portfolio platform, or in fact, enter the market,” Mr O’Brien said, adding that this had resulted in the long anticipated compression in secondary yields.
“It appears most industrial precincts of Melbourne are benefiting from this trend, particularly the traditional core areas of Laverton North and Dandenong South, as well as Somerton and Epping.”
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