Industrial values in Melbourne have jumped by up to 23 per cent in the past year according to Savills. Photo: Supplied

Industrial land values in Melbourne leap more than 20pc

Staff Writers|Apr 17, 2019

A shortage of ‘ready to go’ large industrial sites in Melbourne’s northern and western industrial precincts has led to a spike in industrial land values in the past year, with a further rise expected.

The availability of sites was not expected to improve significantly before 2018, with land parcels ranging from one to five hectares subject to year-on-year gains of 14 per cent and sites larger than 10 hectares the subject of value gains of 23 per cent, said Savills Industrial Director Michael Green.

This compares with residential house price growth across the city of 9.1 per cent in the year to October, according to data from Domain Group’s chief economist Andrew Wilson.

“We have seen significant rises in land values in some key pockets and that has been driven by the shortage of development options at the same time as low interest rates are driving a surge in pre-commitments and leasing demand has risen more than 25 per cent on the long term average,” Mr Green said.

“With delivery of key subdivisions a little way off we are likely to see that upward pressure on values remain until closer to 2018 especially with the strong push from occupiers wanting to get into the market.”

Larger lots are the standout performers according to Savills Research. Image: Supplied

Values in land allotments ranging from 0.3 hectares to 0.5 hectares remained static over the year to September 2016.

According to Savills, 505,200 square metres of industrial accommodation was reported leased in the northern and western industrial markets in the 12 months to September, up more than 26 per cent on the five-year average of 402,193 square metres, with nearly a third of the total leased in pre-commitments.

Savills Associate Director Research in Melbourne, Monica Mondkar, said that touted infrastructure projects in Melbourne’s north and west were set to see demand for industrial land in those precincts increase further.

“Proximity to freeways and major arterials remains the key long-term driver of choice for larger industrial users, particularly those from the transport and logistics sectors, and our research would suggest that quality infrastructure projects in the pipeline such as the Western Distributor and the widening of the Tullamarine Freeway will attract the same level of demand,” Ms Mondkar said.