South-east industrial bucks car industry downturn

The industrial leasing market in Melbourne’s south-east is fighting on amid the winding up of Australia’s automotive industry, with leasing numbers at a 10-year high.

Research from Savills shows more than 404,000sqm of industrial space larger than 2000sqm was leased in the south-east in the last financial year, well up on the 252,604sqm leased the previous year and significantly higher than the 10-year average of 230,498sqm.

Leasing pre-commitments for new facilities were also at their highest point for a decade, with 179,667sqm already squared away.

Pre-commitment: US giant Spectrum Brands follows Costco to Moorabbin Airport

Reports earlier this year predicted the demise of Australia’s automotive industry would leave a vast hole in the industrial property landscape, with more than 650,000sqm of industrial space potentially vacated across Melbourne alone.

Around 335,000sqm of that space is predicted to be in the city’s south-east.

Spectrum Brands will join Costco at Moorabbin Airport’s industrial precinct.

But Savills divisional director of industrial Lynton Williams says the current outlook for the region is better than expected.

“Leasing in the 12 months to June is not far short of double the 10-year average and that is great news for a supposedly soft market, however we need to keep in mind that pre-commitments are also at a decade high,” he says.

Among the substantial pre-commitments completed throughout the year were Woolworths’ 20-year deal to occupy 68,000sqm at the Portlink Estate in Dandenong South and Spectrum Brands’ 10-year pre-commitment to lease more than 30,000sqm at the Chifley Business Park at Moorabbin Airport.

Williams says site consolidation is behind much of the boom, suggesting the current leasing climate may not last.

“Tenants are consolidating their sites to return businesses efficiencies and that is driving the pre-commitment market,” he says.

Leasing deals are at a 10-year high in Melbourne’s south-east.

“At the same time those tenants and others are taking advantage of some favorable rental deals available and that is also driving pre-commitments along with new leases for existing buildings.”

Wholesalers made up 43% of the leasing activity in the year to June, while manufacturing and engineering accounted for 27% and transport and logistics 18%, Savills’ associate director of research – Victoria, Monica Mondkar says.

“The data clearly shows a shift in the south-east to wholesale retailing and logistics as the Victorian economy continues the trend away from its formerly heavy reliance on manufacturing,” she says.