By Shane Robb | 30 Mar 2016

Melbourne’s industrial vacancy rate has dropped in the first quarter of 2016, and is now sitting at 3.8%, a fall from 4.75%, which was recorded six months earlier in August 2015.

The reduction in vacancy has been recorded in the latest Melbourne Industrial Vacancy Study by Urbis, undertaken by our specialist industrial Real Estate Advisory team.

A result of 3.8% is very strong, recognising in 2015 we saw just over 435,000m² of new construction (buildings over 10,000m²) compared to construction levels in 2014 and 2013 of 295,000m² and 250,000m² respectively.

In February 2015 and August 2015, the Industrial Study recorded a vacancy for Melbourne of 4.5% and 4.75% respectively. The current vacancy of 3.8% reflects a contraction in each of the northern, western and south-eastern submarkets by between 0.8% and 1.3% whilst the eastern and inner submarkets remained stable.

The vacancy rate has fallen because the majority of new supply has reverted to demand led pre-commitments, as opposed to being speculatively built.

The vacancy rate has fallen because the majority of new supply has reverted to demand led pre-commitments, as opposed to being speculatively built.

Back-fill space from the new construction is yet to completely filter into the market and the pending motor vehicle manufacturing industry closures is likely to see this vacancy rate increase at the next survey in August 2016.

Goodman remains the major institutional owner, but only just over Charter Hall. The remaining three largest owners include Frasers Property, Growthpoint and Stockland.

The level of foreign ownership has grown considerably in the six months prior to this biannual Study, with Fraser Property’s purchase of Australand and Ascenda’s purchase of the GIC/Australand JV and GIC portfolios. However, the level of foreign ownership remains relatively low, hovering below 10% of total stock surveyed in the study.

The study shows that 53% of total stock is of Prime or Modern quality, with almost half of this floor space located in the West submarket. Total Prime/Modern quality stock recorded a  vacancy rate of 4.5% for the current study while the Secondary/ Tertiary quality stock recorded a vacancy rate of only 3.0%, driven down by a number purchases by  owner-occupiers who are likely to be taking advantage of the current record low interest rate environment

Urbis’ Industrial Vacancy Study focuses on buildings located within metropolitan Melbourne and are of 10,000m² or more in size. The study is designed to identify total industrial stock, and the subsequent vacancy; by size, submarket and quality.

The study is the seventh of its kind conducted by Urbis, a leading national real estate advisory group. It comprises 740 buildings of over 10,000m² each totalling over 14 millions square metres of industrial floor space.

Of the 24 Prime/Modern building vacancies, 13 are located in the West, seven are in the South-East, three are in the North and one is in the East.

The study is the seventh of its kind conducted by Urbis, a leading national real estate advisory group. It comprises 740 buildings of over 10,000m² each totalling over 14 millions square metres of industrial floor space.

Other take outs from the study include:

  • Vacancy by floor space in the major submarkets is spread between the West (42%), the South-East (32%) and the North (17%).
  • The Prime/Modern vacancy rate is 4.5% whilst the Secondary/Tertiary vacancy rate is only 3.0% primarily as a result of owner occupier purchases.
  • The average size of a vacant facility is just below 13,700m².
  • The average size of a vacant facility in the North is approximately 15,500m², 14,000m² in the West and 13,000m² in the South East.
  • The average size of a Prime/Modern vacant facility is approximately 14,250m² whilst only 12,800m2 for Secondary/Tertiary facilities.