Whilst we find ourselves in a once in a lifetime global pandemic, for many occupiers, this presents opportunity for their business. Prior to Covid-19 landing on Australian shores, we have seen consistent year on year growth from several facets within the industrial market. Lower supplies of industrial land has driven demand for developers, resulting in an increase in building rates and rents thereafter. Please see the below driving factors which ensures this positive outlook in 2020 and beyond:
- In the middle markets being 3,000-5,000sqm the vacancy rates sit at 6.6%. The inner west core suburbs, being Altona, Altona North and Brooklyn remain extremely tight with the vacancy rate being less than 1%. We are seeing a slightly higher vacancy rate in outer west core suburbs such as Derrimut and Truganina. This vacancy rate is sitting around 5.8% which we still consider to be strong.
- Industrial property has been less impacted by the COVID-19 pandemic than other commercial sectors. It has profited from an increased demand in warehouse space from retailers and logistics providers due to a large reliance of peoples online shopping. In addition to this, there has been an increase demand for FMCG products after we saw supermarkets and independent suppliers struggling to keep up with supply from panic buying.
- Melbourne’s Western industrial land values continue to remain strong due to the high demand and lack of supply of zoned and subdivided land. Land prices have increased by 80% in the past 4 years across the western market. This is in-line with the other main industrial sectors of Melbourne. Recent resale blocks of land in Truganina have sold for more than double what they sold for in 2017 due to the lack of opportunity.
- Onshore manufacturing. Some economists are discussing an increase in onshore manufacturing in the advanced economies by using robots to compete with the cheap labour of emerging economies like China. This is a massive opportunity to restart Australian manufacturing.
- Aggressive inner west buying. Two 14ha sites have been acquired by funds for future redevelopment giving developers, owner occupiers and tenants an opportunity to reposition themselves back in the thriving inner west markets allowing close connectivity to the ports and CBD.
The market continues to move at a rapid pace, and we have the data to help back your next strategic property decision. Please don’t hesitate to contact Charlie Woodley or Stephen Ryan for further information