Empty sheds a rarity as vacancy rates plunge
Melbourne's vacancy rate fell from 2.55 per cent to 1.55 per cent in the six months to March this year.

Empty sheds a rarity as vacancy rates plunge

Truck giant Scania will drive into a new distribution centre in Melbourne’s north at a time when empty sheds are a rarity and the industrial sector’s vacancy is shrinking to record lows.

The Swedish commercial vehicle manufacturer is leasing a 9364 square metre warehouse with multiple loading areas and plenty of turning room for its spare parts business from landlord Centennial Industrial & Logistics.

It’s not the only firm seeking new warehousing space.

CBRE’s National Industrial Vacancy Report estimates the city’s vacancy rate fell from 2.55 per cent to 1.55 per cent in the six months to March this year, lower than the unusually tight national average of 2.24 per cent.

The number of sheds (4000 sq m or larger) empty in the city’s popular east and south-east sector fell to just 1 per cent, a record low. Only five years ago, vacancy in the sector was 7 per cent.

Little wonder then that Frasers Property Industrial has leased the last major component of its Braeside Industrial Estate to ASX-listed IVE Group marketing and communications business.

With an end-value around $61 million, the deal involves Frasers developing and then leasing to IVE a 12,755 square metre warehouse/office and an 18,068 sq m print production facility. The marketing group already leases four other buildings on Frasers’ estate.

Frasers southern region manager Anthony Maugeri said the combination of tight land markets and a lack of new sheds was spurring repeat customers like IVE to sign up for long 10-year and 7-year leases.

Scania’s new operation at 40 Decco Drive in Campbellfield is in a part of town where vacancy, while higher than in the south-east, is still historically low at 2.4 per cent.

The truck company’s 10-year lease was negotiated by CBRE agents Daniel Eramo and Joe Brzezek and Scania representative Tony Tripodi.

The all-time low vacancy figures are driving up rent and pushing down incentives.

CBRE’s Stephen Adgemis said that for the first time rents were reaching $100 per sq m in the south-east, while incentives were down from 30 per cent a year ago to between 10 and 20 per cent.

“That is the result of a lack speculative development and high demand, fuelled by what is now very strong economic sentiment,” he said.

“Even with 170,000 sq m of speculative development in the pipeline, there is a massive shortage of buildings.”

Land values have spiked by 25 per cent in less than a year, CBRE estimates.

Melbourne’s overall net absorption and vacancy rate is 653,365 sq m and 1.55 per cent, ahead of the rest of the country but behind Sydney’s 738,325 sq m and 1.4 per cent respectively.

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