Benchmark your industrial assett
Colliers has analysed the lease expiries of Melbourne West’s industrial buildings with Net Lettable Area (NLA) exceeding 3,000sqm.
This information will assist landlords of Western industrial assets in assessing their portfolio performance.
Figure 1 WALE by NLA Size Range (Sqm)
As can be observed in Figure 1, the WALE of each range increases as the buildings get larger; this will be no surprise to those familiar with Melbourne West’s industrial precinct. This relationship is driven by Melbourne West’s active pre-lease market. Pre-commitment transactions attract larger built area buildings (see figure 2) and longer lease terms (see figure 3).
Figure 2 Building size of Pre-Lease transactions
As demonstrated in Figure 2, the size of buildings in pre-lease transactions are centred around the top end of the size range. For the last three years, over half of pre-lease deals have been for buildings with NLA exceeding 20,000sqm.
Over the last six years, pre-lease transactions have attracted on average an additional four and a half years on to their initial lease terms, as shown in figure 3.
Figure 3 Average initial lease terms of existing building and pre-lease commitment lease transactions.
In 2019, the average initial lease term for a pre-lease commitment was 9.3 years, 3.8 years higher than the average existing buildings initial lease terms.
Weighted by region
Melbourne West’s market can be classified into two regions; the Inner West and Outer West. The core Inner West industrial suburbs consist of Sunshine, Brooklyn and Altona/Altona North. The core Outer West industrial suburbs consist of Truganina, Derrimut and Laverton North.
Institutional landlords and developers control 75% of the Inner West’s industrial investment assets exceeding 3,000sqm, and private landlords control the remaining 25%. Institutional landlords and developers hold greater dominance in the Outer West region, controlling 81% of the industrial investment assets, with private landlords controlling the remaining 19%.
In recent years, development in the West has been dominated by institutional developers with estates located in the Outer West. Pre-commitments are the driving force of development. The Outer West’s industrial footprint is now three times greater than that of the Inner West.
This development activity makes it no surprise that the WALE of industrial buildings exceeding 3,000sqm is 5 years for the Outer West region and 3.5 for the Inner West region. Figure 4 depicts the volume of existing building and pre-commitment lease transactions for each region over the last six years.
Figure 4 Volume and type of lease transactions for each Western regio
As demonstrated by Figure 4, the Outer West region has a higher volume of transactions and percentage of pre-lease deals, resulting in a higher WALE.
Weighted by suburb
The WALE of each of Melbourne West’s core industrial suburbs presents a similar trend to the regions. However, this analysis has allowed us to identify outlier suburbs such as Derrimut and Altona North.
Figure 5 depicts the WALE of each suburb, and the precincts radial distance to the CBD.
Figure 5 WALE by suburb
As observed in Figure 5, the WALE of Western industrial suburbs increases as the distance to the CBD becomes greater.
Derrimut is presenting an interesting anomaly to this trend; this could be accredited to comparably less pre-commitments occurring in recent years, compared to its neighbouring suburb of Truganina.
Altona North’s WALE is being lifted by several substantial tenancies with long lease tails, such as Winning Appliances (45,000sqm), Silk Logistics (44,000sqm), ACFS (25,000sqm) and F.Mayer Imports (22,000sqm).