The unprecedented take up of industrial land over the past 24 months in Melbourne, coupled with shrinking land supply, is set to spark new levels of demand from institutional and private investors as well as developers in the year ahead.
Tony Iuliano, Colliers International National Director of Industrial, said demand for industrial land in Victoria would soar to new heights in 2018.
“Land supply is shrinking and we are reaching new levels of demand from institutional and private investors as well as developers,” Mr Iuliano said. “This demand is eclipsing 2007 levels. Retail lots are limited and zoned englobo land isn’t available.
“Capital is pouring into the Australian market and we have estimated there is a total of $12billion if unsatisfied capital both from offshore and onshore are looking for industrial property.
“Major transactions will continue in 2018 and development from major players will increase as stock tightens up.
“The industrial leasing market continues to go from strength to strength. A total of 700,000sqm was pre-leased in 2017 and we expect this to continue in 2018, which also may push rents in some parts of Victoria to grow. Vacancy is currently very low at less than 4%.”
David Follacchio, Colliers International Associate Director of Occupier Services, said 2017 ended on a high for industrial occupiers in Melbourne.
“We saw continued healthy occupier activity at the end of 2017, with a particular appetite for relocating into alternate accommodation given market incentives,” Mr Follacchio said.
“There are signs of tightening supply across all markets. For example, the number of submissions we now receive from developers in response to requests for purpose-built industrial facilities is lower than previous years. This reflects the unprecedented take up of industrial land over the past 24 months in Melbourne."
Mr Follacchio said in 2018 there was a high probability of declining incentives and increased appetite for land purchase as supply diminishes following significant leasing activity in 2017.
“On the back of shortening land supply for development, I see market incentives dropping and face rents trending upward in the year ahead,” he said. “This should motivate occupiers to action their requirements sooner rather than later.”