February 2018 :: Market Updates
SUPPLY AND DEMAND – THE AGE OLD PRINCIPLE
2018 has certainly seen a continuation of the strong number of enquiries we experienced in 2017. Demand is fast outstripping supply, creating significant upward pressure on industrial property prices across Melbourne.
The most noticeable increases have been in land sales. In the past 12 months, we have experienced 25%+ increases in industrial land values. Many of the figures being achieved are breaking new records. Three examples of this are:
- North-Epping – 5000m2 of land recently sold for $330/m2 + GST
- West – Laverton North – 20,000m2 of land recently sold for $245/m2 + GST
- South East – Dandenong – 10,000m2 – owner recently rejected an offer of $600/m2 + GST.
Rutherfords can see no end to the increases at this point. We are currently witnessing strong local economic confidence which has always driven the industrial property market. Compounding this is the greatest lack in supply of zoned, serviced industrial land in over 20 years. The increases are here to stay.
The flow-on effect of higher land costs as new product is constructed are higher prices for new buildings. We have started to see this already but expect the effect has not had full impact yet, with many current developments being built on land purchased 12 to 18 months ago.
Once new building prices take full effect, it will obviously affect existing property prices. After eight years – from 2008 to 2016 – of very little capital growth in industrial property, its ‘catch-up’ time.
