Melbourne's industrial property market booms as supply falls
Melbourne’s industrial land values have grown at the highest rate nationally, with 22.8% growth in 1.6ha lot values over the past year, demonstrating that investors remain willing to pay a premium for industrial land.
24 May 2019
This was one of the key findings from CBRE’s Q1 Australia Industrial and Logistics MarketView, which highlights that 1.6ha lot land value rises were highest in Melbourne’s East and West, growing by 35.5% and 25% y-o-y respectively to an indicative $525/sqm and $238/sqm.
“Historically, Melbourne’s West has provided the cheapest industrial land in Melbourne, however demand for affordable rents has driven land values in the West to be more expensive than the North, where 1.6ha lot land values have risen 6% year-on-year to $220sqm,” said CBRE’s Kate Bailey, Head of Logistics and Retail Research.
“Elsewhere, the growing importance of accessibility to ports and customer bases is driving growth in inner Melbourne, where 1.6ha lot land values surged by 23.5% year-on-year to $1,050 per square metre.”
The South East also experienced strong growth in land values of 16.8% y-o-y to $438 per square metre, with long-standing investor interest in the area demonstrated by the transaction of 508 Wellington Road, Mulgrave.
The property changed hands for $15.5m in December 2016 and again for $30.5m in September 2018 without any value added.
Industrial super prime net face rents across Melbourne also continues to rise, growing at the second highest rate nationally, with the increase of 7.4% y-o-y reflective of continued demand for well-located industrial space in areas with low land and stock availability.
The growth was largely driven by the East and North precincts with increases of 3.7% to $105/sqm and 3% to $85/sqm respectively.
“In tightly held precincts such as the South East, a lack of land is driving demand for secondary markets such as Cranbourne West and Pakenham,” said James Jorgensen, the new head of CBRE’s Victorian Industrial Team.
“The West continues to account for the largest amount of space take-up, accounting for over two-thirds of Melbourne’s industrial leases and approximately 77% of lease transactions over 4,000 sqm so far in 2019.”
The Port of Melbourne has been a standout, with multiple tenants relocating businesses from the CBD to utilise warehouse space in the precinct for industry and storage uses, driven by improved accessibility and parking availability.
Other key highlights of CBRE’s Q1 MarketView report include:
• Nationally, super prime net face rents have increased 2.0% y-o-y, with Adelaide recording the strongest growth of 8%.
• Super prime yields have compressed by 17bps over the past 12 months and 13bps in Q1. This was primarily driven by a 50bps compression in Perth yields in the first three months of 2019, as investors priced out of east coast markets looked further afield for increased returns. Sydney super prime yields remain the sharpest in the country at 4.85%, followed by Melbourne at 5.00%.
• Land values continue to grow nationally with average prices per square metre for 1.6ha parcels up 5.3% y-o-y driven by strong growth in Sydney, Melbourne and Brisbane.
• Industrial and logistics sales in Q1 were down 51% compared to Q1 2018, with just $726m in assets transacted. This was primarily due to the small volume of assets available for sale and, with several significant properties in due diligence, CBRE is forecasting that H1 sales volumes will be broadly in line with H1 2018.For Australian/international news or global stories, follow us on Twitter: @cbreaustralia
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CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2018 revenue). The company has more than 90,000 employees (excluding affiliates) and serves real estate investors and occupiers through more than 480 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.
Neither CBRE nor its affiliated companies make any warranties or claims on the implied accuracy of the information contained herein.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE: CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2021 revenue). The company has more than 105,000 employees (excluding Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at https://www.cbre.com.