_Western Melbourne’s established and emerging industrial markets

To understand potential land pricing, we have assessed recent transactions in two distinct categories of established infill locations and emerging locations within West Melbourne.

Since the start of 2018, developers have purchased approximately 670 hectares of industrial zoned land in Melbourne’s west (accounting for purchases above 5 ha). With few remaining zoned and developable land parcels over 5 hectares, existing land supply is nearing exhaustion. In addition, the west’s industrial market is becoming an increasingly popular destination for large companies due to the affordable rents and proximity to the CBD and ports.

The western precinct has recorded a five-year average annual absorption rate of 329,300 sqm for properties above 5,000 sqm. Extrapolating on historical figures, Knight Frank estimates most of the existing landbank in Melbourne’s western market will be absorbed over the next 10 years. As the remaining developable land in the West is captured, developers, investors and owner occupiers will naturally migrate to an emerging area that will suit these same needs.

Evidence of land sales in these areas include:

Emerging Market Assessment

A surging Victorian economy, strong population growth and the rising industry of e-commerce have all been major factors in the strong sustained growth of the industrial sector. As companies are in constant pursuit to satisfy a generation of consumers where expectations of same day deliveries are rising, the demand for well-designed purpose-built facilities has soared. In combination with the high demand, there is a distinct lack of development ready industrial sites in Melbourne’s west. Consequently, developers have snapped up sites at record rates to ensure they have control over the remaining landbanks as industrial assets grow in demand.

As a result, institutions are acquiring land further west from the CBD. This is evidenced by Stockland’s 260-hectare Mount Atkinson Estate, and Dexus’ 128-hectare Ravenhall Estate, which are both over 20 radial kilometers west of the Melbourne CBD. As land prices continue to rise and the industrial land supply tightens, Knight Frank believes developers will view Melton as a future industrial growth corridor as the precinct boasts efficient transport routes to the city and has support from a growing residential catchment. It is important to note, Melton is located only 32km west of the Melbourne CBD and 30km west of the Port of Melbourne, roughly the same distance as Dandenong, an existing destination for industrial occupiers in Melbourne’s South East. As the existing industrial landbank is developed over the following years, the surrounding residential catchment develops and major infrastructure projects such as the Outer Metropolitan Ring Road are completed, Melton presents a compelling case to be a future industrial hub.