This article is from the Australian Property Journal archive
WESTERN Melbourne industrial land prices have jumped more than 20% over the past eight months, as owner occupiers compete with developers for low supply.
The sale of a 6,446 sqm lot within Axiom Estate in Truganina set a new land rate record of $385 per sqm after several years of steady price growth that began with prices sitting around $150 to $200 per sqm as recently as 2016.
Vacant land sites are now fetching rates close to $600 per sqm.
An owner occupier set a new benchmark last month, paying $585 per sqm – $2.92 million in total – for a 4,987 sqm lot at 4 Delivery Drive within the Connect West Estate.
The shortage of existing built stock is encouraging more owner occupiers to buy land and construct. Camping and 4×4 accessory supplier Sun Yee International has just purchased a 6,107 sqm development site in the Access Altona precinct for $3.46 million, a rate of $566 per sqm.
The online retailer currently leases 32 Drake Boulevard in Altona, but bought 25-29 Drake Boulevard with plans to build a 4,000 sqm headquarters to accommodate its growing operation.
CBRE’s Ricardo Cappelletti, who managed the sale with colleagues Harry Kalaitzis, Tom Murphy and Fergus Pragnell, said demand for quality industrial land and buildings within infill locations in western Melbourne is “soaring to unseen levels”.
Industrial supply and floor space availability has been squeezed by e-commerce requirements, making the leasing market ultra-competitive. Melbourne saw gross take-up of over 450,000 in the December quarter, accounting for 55% of national demand after the city spent extra time in lockdown, and still went on to account for 53% of total industrial and logistics space absorbed in Australia in the first quarter of 2021.
“Sun Yee International’s purchase is indicative of the increased activity we’re seeing from owner occupiers,” Cappelletti said.
“It wanted to move from tenant to owner and, given the lack of suitable stock, Sun Yee International explored a titled land acquisition that would allow it to build and move in line with its lease expiry.”
A pair of 7,232 sqm sites on the same street in Truganina were snapped up by owner occupiers. 40 National Drive was bought for $3.507 million, at $485 per sqm, in February, and just two months later 44 National Drive was sold for $3.616 million – or $500 per sqm.
The CBRE agents also managed the $505 per sqm sale of 39 Orbis Drive, Ravenhall. The property spans 10,785 sqm, fetching $5,446,000.
In Laverton North, a basic warehousing site of 10,150 at 9-11 Fitzgerald Road sold for a high $591 per sqm, at $5.99 million, to an owner who plans to redevelop the low-site coverage property in the coming years.
“As recently as four or five years ago, prices were sub-$200 per sqm, and industrial land was generally sub-divided and sold down,” Cappelletti added.
“Since then, institutional groups have steered away from sub-dividing land for resale, instead largely looking to pre-lease and construct sites for large-scale occupiers.
“Now we’re seeing more and more owner occupiers enter the picture, increasing demand and ultimately prices.”
Sandhurst Retail and Logistics has just unveiled plans a 140 hectare industrial estate in Melbourne’s northern suburbs, looking to take advantage of the demand for distribution and warehousing.
