Shortage of large-scale logistics facilities in Melbourne

Colliers

The industrial leasing market in Melbourne’s north has seen strong tenant demand continue to absorb supply of prime-grade stock, according to real estate group Colliers International, particularly in the food and beverage, logistics and specialised manufacturing industries.

“As leasing space and supply continues to tighten across the northern suburbs, we are also starting to experience a reduction in let-up time and incentives, with one of the key drivers being a shrinking serviced land allotment pipeline,” said Colliers International’s Marco Sandrin.

“With respect to current leasing vacancy for more than 10,000m2, we are currently experiencing the tightest market there has been for many years, with only eight buildings available, totalling just more than 100,000m2.”

Sandrin said two of the most significant transactions that had occurred this year were within the Melbourne Airport precinct.

“Growthpoint has leased 120 Link Road, a 26,517m2 facility to Wesfarmers’ Workwear Group, and 45-55 South Centre Road, a 14,082m2 facility to Direct Couriers, both on 10-year leases,” he said.

In Melbourne’s western suburbs, 50 per cent of leasing deals for more than 3,000m2 have taken place in the inner west, with the main catalyst being easy access to the CBD, Colliers International’s Stephen Ryan explained.

“We are also seeing a high demand for low site coverage cross-dock facilities that is resulting in higher square-metre rates across the buildings, along with quicker let-up times,” he said.

“With shrinking land supply and recent leasing take-up, we are expecting let-up times to continue to reduce and the incentives to compress.”

Ryan profiled a deal negotiated for delivery service BagTrans as an example. The company has signed a lease for 8,333m2 at GM Property Group’s business park at 600 Geelong Road, Brooklyn, from the start of October, following less than three months’ vacancy.

Colliers International recently released a custom publication showcasing large industrial facilities suited to transport and logistics, warehousing or distribution users across Melbourne, Big Sheds Victoria 2017.