Private investors are driving Melbourne's south-eastern industrial zone investment market with 70 per cent of all sales over the last 12 months nearly double the 36 per cent recorded in the 2010/2011 financial year, according to Savills Australia’s latest Industrial Spotlight.
Private investors are driving Melbourne's south-eastern industrial zone investment market with 70 per cent of all sales over the last 12 months nearly double the 36 per cent recorded in the 2010/2011 financial year, according to Savills Australia’s latest Industrial Spotlight.
In a year in which the total value of sales declined slightly, more properties sold than in any of the previous five years as low interest rates enticed both private investors and owner-occupiers back to the market.
The research found 47 properties were sold to the end of March, up from the previous 12 months’ total of 36 and up on the five year average of 40, while the total value of stock sold, at $260 million, was down only marginally from the $267 million in the previous year, and on the five year average of $276 million.
Savills Notting Hill office Director, Lynton Williams, said the data indicated there remained a very healthy level of interest in the market.
"This is perhaps the best indication we have had of a return to confidence in the market since Lehman Brothers famous collapse in September 2008 when the GFC was in full swing.
"While there remains room for improvement in the market, with the total volume of sales still trailing a little on previous years, there seems little doubt that interest rates have had the desired effect in Melbourne’s industrial south-east,’’ Mr Williams said.
He said the data would be a boost for developers considering speculative projects.
"There is a current shortage of good quality industrial stock in the south-east and this has, and continues to, entice local developers to proceed with speculative projects.
"The fact that private investors and to a lesser extent owner-occupiers, are very much in the market, provides a further incentive for developers in their ability to divest their projects on completion,’’ Mr Williams said.
Author of Savills Industrial Spotlight March Qtr 2013, Victorian Head of Research, Glenn Lampard, agreed that those with the ability to speculatively build in the South-East market would be met with strong tenant demand as available prime grade space became increasingly limited.
"Savills identified approximately 178,584 square metres of industrial accommodation leased in the South-East in the 12 months to March and while this is down on the five year average it is up on the year prior (164,894 square metres).
"If this leasing upswing continues to add to the excise of quality stock from the market then the current shortage will be exacerbated leaving lots of scope for developers to proceed with new construction," Mr Lampard said.
The report also found market yields for prime industrial buildings were estimated to range between 7.75 and 8.75 per cent in the South East while capital values had increased by between 7 percent and 25 percent for all industrial regions since the bottom of the market in March 2009.
It found sales in the price range of $2 million to $10 million – the bulk of the South-Eastern market acquisitions - totalled $339 million which was greater than the 10 year average of $305 million.