Melbourne

South-east Melbourne leases secured as industrial vacancies hit a record low

Centuria Industrial REIT has finalised two significant lease deals in Melbourne totalling over 17,000sqm, as industrial vacancies hit a record low in the city’s south east.

22 Apr 2020

Centuria Industrial REIT has finalised two significant lease deals in Melbourne totalling over 17,000sqm, as industrial vacancies hit a record low in the city’s south east.

David Aiello, CBRE Senior Director, Industrial & Logistics, said lease commitments from Morrows Logistics Group and Vincent Cold Storage coincided with a chronic shortage of industrial and logistics space, which was spurring demand for increased speculative development activity in the region.

For buildings larger than 4,000sqm, the vacancy rate in Melbourne’s south east has continued to drop in the early stages of 2020, reaching 1.73% in March.

That follows a fall of roughly 200,000sqm on total leased floor space in 2019, from the 2018 figure of approximately 450,000sqm. 

“South east industrial vacancy is at an all-time low,” Mr Aiello said.

“Many tenants just couldn’t find the right building last year, so either reluctantly took up their option to stay put or are still treading water.”

Highlighting the rising demand for space, CBRE recently finalised a deal with Morrows Logistics Group for an 8,507sqm Noble Park warehouse, to take occupation in Q3 on a seven-year lease.

“We identified Morrows 12 months ago and worked with Centuria to formulate a strategy that would facilitate a long-term commitment, with the company only recently having moved from Dandenong South to a larger facility in Keysborough,” Mr Aiello said.

Located between Eastlink and Springvale Road, the property is certified to store dangerous goods and offers drive-around capability. 

“The specialised nature of the site made it the ideal premises for Morrows Logistics Group,” said Mr Aiello, who secured the off-market lease for landlord Centuria Industrial REIT. 

“They were looking for a facility to accommodate their clients’ increased demand for dangerous goods storage, in a prime location.”

In Keysborough, a cold storage facility at 102-108 Bridge Road was leased to an upsizing Vincent Cold Storage.

The 8,655sqm facility features multiple freezer and chiller rooms, with Vincent signing a five-year lease, facilitated by CBRE’s Mr Aiello and James Jorgensen.

“In a market starved of existing cold storage opportunities, the property provided Vincent Group with the capacity to grow its existing business and attract new customers,” Mr Aiello said.

Centuria Industrial REIT Fund Manager, Jesse Curtis added: “We are pleased to have secured two new customers in the portfolio with limited downtime. 

“This leasing success continues to demonstrate Centuria’s leasing capabilities and quality of our portfolio, reinforcing our position as Australia’s largest pure play industrial REIT.”

Mr Aiello noted the deals and chronic undersupply of space in the south east was enhancing the case for speculative development activity – drawing on the successful experiences of developers in Melbourne’s west.

“In the western Melbourne market, more than 250,000sqm of speculative development was offered in 2019, however developers in the south east have been far less inclined to push the button on permitted sites,” Mr Aiello said.

“Our experience is that many tenants often aren’t affording themselves the time required to secure a pre-lease in a market that is evolving rapidly due to e-commerce and population growth.

“Coupled with the current low vacancy in Melbourne’s south east, this is creating significant opportunities for developers with the ability to undertake speculative projects.

“Having witnessed what happened in the west last year, we would expect a similar boom in south-eastern leasing if tenants are afforded more choice or increased supply.”

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About CBRE Group, Inc.

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 2019 revenue). The company has more than 100,000 employees (excluding affiliates) and serves real estate investors and occupiers through more than 530 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.

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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.