Melbourne Commercial & Industrial Property Market Review - March 2025
“There is good appetite from investors and owner occupiers...”
Market Review – Q1
We hope you have made a great start for 2025. Following a relatively subdued end to 2024, we are seeing improved market confidence across most sectors. There is good appetite from investors and owner occupiers on the proviso that vendors are willing to meet the market and negotiate an outcome. Sellers simply ‘testing the market’ in the hope of achieving an above market outcome are wasting everyone’s time. Buyers generally need some value (now or future uplift) to step forward.
Given the pressure land tax has placed on property owners, it is surprising that we haven’t seen more supply come into the market. The preferred strategy is to factor land tax into future market reviews and hold onto the asset. Ultimately industrial assets remain very hard to replace and remain steadfast investments for the long term. Tenants need to adjust to this new normal, which will probably lead to increases to their goods and services payable by the end user. Base rents have been generally stable however we are seeing some minor reductions for certain properties. This is balanced out by a spike in the cost of outgoings. Tenants are educating themselves on rental rates before renewing leases, and often remain in place once they understand their existing premises is not out of step.
Investment yields remain tighter than forecast, with many deals still being transacted below 5%. This trend is being driven by cash buyers but also the transacting of assets with rent reversionary attributes. Investors with finance obligations are still seeking returns in the 5-6% range.
Please reach out if we can assist further.
Matt O’Dea, Facey Property