Leasing activity remained strong early in 2016 having preformed its best since 2011 in Melbourne. High take-up in the new build market emphasises the strong development pipeline...
Leasing activity remained strong early in 2016 having preformed its best since 2011. High take-up in the new build market emphasises the strong development pipeline coming through over the medium term in Melbourne.
New supply in the first quarter 2016 was concentrated in the North. Overall, the precinct has accounted for 48% of new supply in Melbourne over the last 12 months.
Elevated vacancy continues to be underpinned by an increase in prime grade backfill options within existing stock as tenants upgraded and consolidated from multiple sites into purpose built facilities.
Although vacancy decreased 1.3% over the second quarter, vacant stock levels remain 60% above the long term average. Despite declining by 0.6% over the second quarter, prime vacant space still accounts for the majority of the Melbourne total at 52%.
Available space in excess of 5,000m2 in the City Fringe increased for the first time since October 2015.
For the second consecutive quarter, the Western region recorded an increase in available space with vacant stock levels.
Speculative construction levels are expected to remain relatively low, while the pre-commitment market remains competitive as tenants continue to upgrade and relocate into purpose built facilities. This will continue to support above average vacancy rates in the medium term. Notwithstanding signs that the total vacancy is nearing its peak in the short term, additional properties are likely to come on line in late 2016 and 2017 relating to the automotive industry.
Rutherfords Director Drew Williams commented “The last quarter of the 2016 financial year experienced below average numbers of industrial property transactions from the time the election was announced on 9th of March 2016. We found many companies and developers decided to delay their plans for a few months to see the outcome of the election.” He continues to explain “since 10th of July 2016 when the new government became clear we have seen a significant uplift in tenant and purchaser activity. High vacancy rates, particularly in the west, continue to drive yields down and we expect that to continue throughout 2016. The low interest rates are also creating a growing disconnect between owners not wanting to sell even if the property sits vacant and occupiers want to purchase rather than lease. Overall the industrial market outlook is positive and we expect an excellent next six months with increased levels of activity.”
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