In this month’s Property Focus, MHD catches up with experts from Colliers industrial team to learn more about the growth taking place in Melbourne’s north. Corey Vraca, Senior Executive – Industrial and Mitch Purcell, Executive – Industrial at Colliers run through the latest developments.
With industrial property being one of the standout performers of the last 12 months, it’s no surprise to learn that Melbourne’s highly sought-after and centrally located industrial precincts are experiencing record demand and uptake.
“The market is in a very good shape, we’ve seen our sector be very fortunate and resilient through the economic challenge of COVID-19,” Corey Vraca, Senior Executive at Colliers says.
Colliers’ core suburbs in Melbourne’s north include, but are not limited to, Tullamarine, Keilor Park, Epping, Somerton, Campbellfield and Thomastown. “These are the suburbs that we are currently tracking extensively,” Corey explains.
With vacancy rates across the eastern suburb at record lows, Melbourne’s north is no different. “At the end of Q4 last year vacancy rates for buildings between 750sqm – 3000sqm were at around 6.7 per cent, currently we’re looking at 3.7 per cent,” Corey tells MHD.
Furthermore, across the area only 54 out of 1456 properties are currently vacant. “When we look at how industrial property has performed, this high level of occupancy in such a prime location isn’t really a surprise,” Corey says.
Campbellfield is Colliers’ biggest market in this area and there is a distinct lack of availability in this suburb. “Property in this area is currently tightly held, representing a similar situation generally experienced across Tullamarine and Keilor Park,” Corey explains.
In late 2020, DHL announced it would be taking over Kaufland’s 110,000 sqm distribution centre in Merrifield Business Park in Mickleham, Melbourne’s north. This news came after the German-based grocery chain abandoned its plans to launch in Australia and decided to sell its distribution centre network.
“This is a prime example of the scarcity of land in this area, it didn’t take long for a business to grab the opportunity to be located in Melbourne’s north even for a site of this size,” Corey says.
The speed at which properties are being snapped up is a testament to the popularity of the area. Corey points out that Epping is where a lot of the new activity in terms of building and construction is taking place, however once buildings reach practical competition it’s only matter of weeks before they are sold or leased.
“We just leased two buildings of circa 1200sqm on Jersey Drive, Epping and they were snapped up within a week of completion,” he says.
When it comes to cost, the popularity and scarcity is reflected in the rising costs of rent and land. “In Tullamarine and Keilor Park, we’re seeing rental rates achieve around $110 to $120 dollars per sqm. We’re also seeing a sharp increase in Epping, which is slowly catching up to Tullamarine and Keilor Park,” Mitch Purcell, Executive – Industrial at Colliers says.
Another changing factor in the market this year is that Campbellfield historically had the highest turnover rate in the area, but now its sitting at a record low of 2.7 per cent vacancy, Mitch reveals.
For logistics providers looking for their next site, it’s becoming increasingly difficult to find in Melbourne’s north and as a result Colliers industrial team in this area have had a busy start to the year.
“This year we have completed in excess of 25 transactions in Melbourne’s north with the majority of transactions being across the Epping and Thomastown industrial precincts,” Mitch says.
With demand driving low vacancy rates and higher prices, Corey says the north still provides a premium location and opportunity for many organisations to base their distribution or manufacturing operations.
“Ultimately it comes down to what your priority is, whether it’s affordability or location,” Corey says.
With Melbourne’s north offering access to the major arterial roads and unrivalled access to Melbourne’s airport and CBD, it’s an attractive proposition for many businesses. Particularly with the rise of e-commerce and an enhanced need to be closer to the consumer.
“While Australia is still in its infancy with regards to e-commerce uptake, it’s certainly growing, and the next talking point is around that last mile challenge. We’re going to see a lot more industrial spaces in that sub 3000sqm to 4000sqm range and this area is ideal for those kinds of facilities,” Corey says.
While demand may be close to outstripping supply, there are new developments in Melbourne’s north that Corey says offer a rare opportunity for those looking to move into the area.
“Diggers Rest, approximately 32km north of Melbourne, is experiencing substantial growth. As the infrastructure develops, this will be one of the most affordable sites to purchase land in Melbourne’s north,” Corey says.
With the area to benefit from the North East Link, the biggest road transport project in Victoria’s history, Melbourne’s north is set to remain as one of the most sought-after industrial areas in Victoria.
While the price for land and leaseholds in Melbourne’s north may be rising, the infrastructure, efficiency in the last-mile and access urban population will keep driving demand in this area.
With new developments in areas such as Diggers Rest offering a chance to take advantage of location at a lower cost, it’s up to tenants to decide whether it’s location or affordability at the centre of their operation. “Most of the new estates are focused around infrastructure, so what one lacks in affordability, they make up for in location,” Corey says.
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