Prices soar as big shed shortage hits Melbourne…
(Text taken from Herald Sun, Commercial Property, Wednesday 18th July 2018 – by Olga Galacho)
A serious shortage of big “sheds” in Melbourne is leaving tenants and investors frustrated, while warehouse landlords are sitting pretty.
Industrial shed prices shot up at a double-digit rate across Melbourne in the second quarter, according to research from commercial property agency Savills. No other capital city managed to sustain higher growth in all precincts, according to Savills’ research director, Monica Mondkar. Melbourne’s highest growth was seen in the northern suburbs where prices for warehousing climbed 23% in the year to June.
“Capital values in the west also saw a solid 17% growth, while Melbourne’s east and southeast rose by 20% and 12% respectively in the past year” the report said.
Melbourne capital values now range between $1300 and $2125 a square metre on average. While this range still makes some industrial property among the most affordable to buy in the country, Savills forecast that tenants could expect to pay higher rents in the near future thanks to the strength of the market. The rising temperature in the industrial market has not been lost on large investors, with Cache Logistics, Morgan Stanley, Ascendas Group and pan-Asian developer ESR recently buying substantial logistics assets, especially in the northern and western suburbs. “A more heightened capital value performance has been noticed in the northwest precincts lately due to many large logistics and freight properties transacted in the corridor over the past year.” Ms Mondkar said. “On average, land values for smaller lots (3000sqm to 5000sqm are now ranging between $263 and $950.
“Shortage of ready-to-develop industrial land has pushed up values by as much as 25 and 38% in the north and west respectively.”
“At the same time, the eastern and southeastern corridor saw its small lot prices go up by an astounding 51 and 50% respectively.”
“We expect land supply to get further constrained as an increasing amount of industrial land gets consumed, at the same time being rezoned for residential and commercial purposes amid Melbourne’s unprecedented population book.” She said pent up tenant demand, especially for large purpose built modern facilities had already resulted in a lift in rents.
While tenant demand remained strong, landlords could expect to enjoy strong rental conditions, the agency tipped.