In 2024, the industrial land supply situation in Melbourne reflects a complex interplay of demand, construction activity, and market dynamics. By Daniel Barr-Waanders Research and Data Manager – AND Property 

Current Supply and Demand Dynamics:

“Below is a summary of the most recent research we have conducted, whilst there are challenges from a vacancy and take up perspective the research surrounding the limited current and future serviced industrial land supply clearly indicates that these challenges shouldn’t be present in resilient industrial asset class for too long” – Mr Barr-Waanders said. 

1. Zoned Industrial Land: Greater Melbourne has approximately four years of zoned industrial land supply remaining, indicating a significant scarcity for developers. This situation is exacerbated by the ongoing demand for industrial space driven by e-commerce growth and logistics needs.
2. Vacancy Rates: As of mid-2024, the industrial vacancy rate in Melbourne stands at approximately 2.7% inclusive of sub-lease space, although this figure has seen a slight increase recently. The total vacant industrial space is approximately 1,051,033 square meters, which is circa 17% above the 10-year average.
3. New Supply Forecast: The forecast for new industrial supply in Melbourne by the end of 2024 is around 1.2 million square meters, which is expected to top the long-term average for the sixth consecutive year. This new supply is largely concentrated in the western regions of Melbourne.
4. Transactional Activity: The industrial sales market has seen a notable decline, with only $1.4 billion in sales recorded in 2024 to date, the lowest level in just over ten years. This downturn follows a peak in 2021, highlighting a significant shift in market activity.
5. Rental Growth: Despite rising vacancy levels, rental prices for prime industrial spaces have continued to increase, with a growth of about 10% over the past year. This trend is attributed to the limited stock of available industrial properties.
6. Land Values: Average industrial land values in Melbourne are reported at approximately $855 per square meter (excl city fringe). These values have remained stable, supported by rising rents despite a softening in yields.

In line with the above research, our agency team has been experiencing the following trends from the market. 

“Vendors pricing expectations have not shifted much from the peak of the market, groups are conscious that supply of serviced industrial land is still in low supply and if you compare the asking rates for comparable land in other states such as NSW there still seems to be good value to be had in Victoria” Mr Ricardo Cappelletti said, Co-Founder at AND Property.

AND Property is taking a 5.53 ha parcel to market today at 185 Leakes Road, Truganina. This site represents a unique opportunity to secure such scale in the precinct, the site adjoins Amazon’s new data centre site at 171 Leakes Road, Truganina with the 12.3 ha site selling for $1,037 PSM in August 2023. 

“Demand for serviced land in strategic industrial locations remains strong, there has been some more flexibility around due diligence periods and sometimes settlement periods which is usually leading to transactional activity in the space” – Mr Ben Quennell said,  Senior Manager at AND Property 

AND Property sold a 9,132 m2 serviced industrial lot last week at 24 Doiremus Drive, Truganina which settles later this year but the vendors agreed to a 4 week due diligence to help conclude the deal. 

“There are some obvious obstacles for purchasers including the cost of debt and higher construction costs, however we feel that there are some good value opportunities in the current market which may not be available after some interest rate relief” Mr Bryce Pane, Co-Founder of AND Property said. 

AND Property recently ran a campaign for 4 adjoining serviced lots totalling 4 hectares at the Axiom estate in Truganina. 

Interestingly, we unearthed 8 requirements from owner occupiers looking to build 5,000 – 10,000 m2 warehouses as they have been unable to source existing opportunities. 

Typically assets in this size range are held by REIT’s or high net worth developers who seldom sell. 

Future Outlook

The industrial land market in Melbourne is expected to continue facing challenges related to supply deficits in key precincts, particularly in the southeast. While construction activity is ramping up, the overall demand for industrial space is likely to outpace supply, maintaining pressure on rental prices and land values.

In summary, Melbourne's industrial land supply in 2024 is characterized by a critical shortage of zoned land, low vacancy rates, and ongoing demand driven by e-commerce and logistics, alongside a notable decline in transactional activity and stable rental growth.
 

By Daniel Barr-Waanders Research and Data Manager – AND Property 

Related Reading:

AND Property exclusively offer 185 Leakes Road Truganina for sale | The Industrialist

Ricardo Cappelletti and Bryce Pane launch AND Property | The Industrialist

AND Property welcomes Daniel Barr-Waanders | The Industrialist

Truganina industrial assets reap more than $30 million through AND Property | The Industrialist

Significant Clayton industrial site sold $21m by And Property  | The Industrialist