Melbourne props up industrial leasing results

Metro Trains has leased almost 20,000sqm of space in Clayton.

Melbourne is playing a lone hand in firing up Australia’s industrial leasing market, having been the only Australian city to record significant growth over the last year.

Of the three million square metres of industrial space leased in the 12 months to September, Melbourne accounted for more than a third, while recording a 49% rise in leased space compared to the five-year average, according to Savills data.

That compares to a 0.49% lift in space leased nationwide, driven almost exclusively by the gains made in Melbourne, which leased 285,000sqm more industrial space than the previous 12 months – up to 1.043 million square metres from 758,452sqm.

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Sydney leasing slipped 38% from 1.192 million square metres to 737,722sqm compared to the previous year, and dropped 26% on the five-year average.

But Savills national head of industrial Darren Curry says Sydney’s results will look very different by year’s end, with a number of major occupiers set to take pre-leases on facilities larger than 40,000sqm.

The markets are unequivocally illustrating the variance in economic fortunes the mainland states have experienced since the end of the mining investment boom

“The next quarter will see those Sydney numbers turn right around and a key driver will be the requirements of third party logistics occupiers on the back of contract expiries,” Curry says.

“Sydney will be coming home with a wet sail and that augurs well for 2017 in no uncertain terms.”

Brisbane industrial property continues to experience strong leasing demand.

Brisbane industrial property continues to experience solid leasing demand.

Perth was down 20% on the five-year average, having leased 347,712sqm, while Adelaide fell 4.4% to 260,514sqm.

Brisbane was the only other capital city to gain ground, with its 622,830sqm of leased space a 1% improvement on the last five years.

Savills national head of research Tony Crabb says some states are still being significantly impacted by the mining downturn.

The next quarter will see those Sydney numbers turn right around and a key driver will be the requirements of third party logistics occupiers

“The markets are unequivocally illustrating the variance in economic fortunes the mainland states have experienced since the end of the mining investment boom,” Crabb says.

“Victoria’s population growth is above the national average and New South Wales is not far behind, while growing confidence in economic performance, including large infrastructure projects and concomitant jobs growth in both states, has resulted in a healthy rise in industrial leasing, and in particular has driven demand for large and modern industrial buildings.

“Perth remains in the doldrums, however there are a number of active requirements in the market which may lead to an increase in this activity in the medium term, while Brisbane is tracking nicely above the long-term average and Adelaide just below.”

Savills’ Victorian head of industrial says pre-leases are behind the Melbourne boom, with early commitments accounting for nearly a third of the city’s industrial leasing activity.

Among the major leasing deals completed in the September quarter were logistics giant DHL’s deal for 32,712sqm at Altona, while Metro Trains secured more than 24,000sqm in Clayton.