Large-scale industrial sites fetch premium prices

Colliers International witnesses surge in commercial property buyers in Melbourne’s south-east and north-west industrial precincts 

Large-scale industrial sites in Melbourne’s south- and outer-east suburbs are fetching record prices, as buyer appetite continues to escalate.

Colliers International is experiencing unprecedented demand from developers, land-bankers and owner-occupiers wanting to remain in or move to the Monash precinct.

Industrial agents Justin Fried and Jonathan Mercuri have welcomed more than $60million in assets to market in recent months, saying enquiry was “through the roof”.

“Developers are looking to landbank sites for higher or better use, while occupiers are trying to enter or stay in the market, with the view to own, rather than lease, their factory assets,” Mr Fried said.

He and Mr Mercuri have just transacted a food-manufacturing facility at 4-8 Ricketts Road, Mount Waverley, receiving 10 offers from a pool of local and interstate developers, land-bankers and owner-occupiers.

The deal follows Colliers International’s sales of 1513 Centre Road, Clayton, and 17-21 Hardener Road, Mount Waverley, for a total of more than $30million.

Meanwhile, a major distribution centre at 40-48 Howleys Road, Notting Hill, is on the market via expressions of interest and expected to garner more than $12million, and expressions of interest have closed for a high-clearance office/warehouse at 80-84 Peters Avenue, with a sale expected within the next few weeks.

“We have not witnessed this level of activity in recent years,” Mr Mercuri said.

“The current market conditions are the prime time for building owners to cash in.”

Mr Fried said the Monash precinct had experienced “a real lack of industrial stock historically”, due to its popularity and long-term private ownership creating tightly held estates.

“For those seeking sites more than 5,000sqm, there were simply no options in recent years,” he said.

“With such strong demand at present and an increasing buyer demographic wanting to take advantage of the business opportunities within the Monash Employment Cluster, we’re encouraging owner-occupiers to offload their assets and capitalise on the premium prices being achieved.”

On the other side of the city, the industrial leasing market in Melbourne’s north has seen strong tenant demand continue to absorb supply of prime-grade stock.

Colliers International’s Marco Sandrin said this was particularly the case 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,” he said.

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

Mr 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 26,517sqm facility to Wesfarmers’ Workwear Group, and 45-55 South Centre Road, a 14,082sqm facility to Direct Couriers, both on 10-year leases,” he said.

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

“We are also seeing a high demand for low site coverage cross-dock facilities that is resulting in higher sqm 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."

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

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