Melbourne Commercial & Industrial Property Market Review - March 2023
“Businesses and investors continue to encounter sturdy competition for A & B grade industrial spaces.”
The Melbourne South East Industrial market is currently experiencing sustained limited supply, which is generally maintaining prices despite reduced confidence in the market. The limited supply is caused by several factors such as high demand for industrial properties, scarce land for development and limited new construction activity. As a consequence, businesses and investors continue to encounter sturdy competition for A & B grade industrial spaces, resulting in higher rental rates and strong sale prices.
The biggest group of active buyers in the market recently has been in the owner occupier space and it will be interesting to see if this trend will continue throughout 2023 given interest rate pressures. Previous cycles have seen a trend towards leasing when rates lift as businesses look to redirect capital into supporting their balance sheets. The point of difference this time around is that rents have also significantly lifted. This is definitely an issue that we will be keeping a close eye on to see what trends will emerge in the next quarter.
As mentioned above we have seen strong gains in industrial rentals which has provided a great opportunity for landlords when they reach a market review or need to come back to the market.These increases have allowed us to reposition some assets for the next cycle and improve property values. They have also more then offset the softening of yields expected in the short – medium term.
Our first auction of the year in February provided some insights around buyer confidence. Despite located in a tightly held pocket the volume of bidders and bids was down from previous quarters. We still managed to sell under the hammer however the reserve was only just exceeded. A clear indication that buyer confidence has softened as we await the levelling out of interest rates which appears on the horizon. A well thought out marketing strategy when divesting has never been more critical.