Melbourne industrial land sky rockets!

INDUSTRIAL land prices in Melbourne are soaring at unprecedented rates not seeing in two decades, rising by as much as 100% in the past three years, prompting fear of missing out (FOMO) developers to scramble for sites, according to Cushman and Wakefield.

New Cushman and Wakefield research shows price increases of 50% to 100% have been recorded across Melbourne.

National director of research Tony Crabb said in his two decades of following the industrial market he had never seen such strong growth in land prices.

South East vacant industrial land prices are up as much as 50% over the last 12 months with substantial prices rises evident since the start of the year.

Crabb observed that small blocks that traded for $325 per sqm three years ago would now trade for closer to $500 per sqm. Larger blocks that traded for $200 per sqm are now trading for over $300 per sqm.

Similarly smaller blocks of land in the North have also seen price rises of over 50% whilst larger lots have recorded increases of closer of 30%. Small blocks that traded for $200 per sqm three years ago would now trade for closer to $400 per sqm. Larger blocks that traded for $170 per sqm are now trading for closer to $250 per sqm.

At the same time, the West – an area generally regarded as having an abundance of land, has seen price increases of as much as 100%. Small blocks that traded for $190 per sqm three years ago would now trade for closer to $300 per sqm. Larger blocks that traded for $150 per sqm are now trading for closer to $200 per sqm.

Crabb said the price growth is attributable to a number of factors, including:

1.  A lack of serviced industrial land available to be developed immediately;
2.  Increasing infrastructure costs;
3.  The inability to quickly get zoned land to market due to planning and infrastructure delays;
4.  A need from developers to replenish their land banks for the next round of development demand driven by a strong economy;
5.  The incursion of residential into traditional industrial zones which can be seen most clearly in the inner city but also in the middle ring suburbs where industry is displaced to outer areas;
6.  Increasing demand for technology-capable facilities where companies can drive substantial productivity benefits; and
7.  The arrival of new users into the market such as Amazon.

“In 2015 I sold the Drystone Estate – 80ha at $27 per sqm – to Charter Hall and earlier this year they bought 60ha across the road for circa $95 per sqm. If that is the englobo rate then the price of serviced land is certainly rising,” Cushman and Wakefield director of industrial and Melbourne west specialist David Norman said.

Director and Melbourne north specialist Michael Green said developers are now feeling FOMO.

“There is a bit of a scramble – a fear of missing out amongst developers who do not have any land. After MAB’s land at Alliance, we are out to Merrifield and larger lots. Sub-5,000 sqm lots are hard to find,” he said.

Director and Melbourne south east specialist Andrew O’Connell said three recent examples come to mind which illustrate the current state of the market.

“We sold 103 Fairbank Rd, Clayton in September 2017 for $406 a sqm and the new owner split it up and we recently sold the six lots for $790 a sqm.

“We just sold 28 Enterprise Drive in Rowville with a 30% easement on the 6,030 lot for $2.6 million generating a useable land price of $616 a sqm. We also sold 90 Whiteside Rd in Clayton South which was a 2.37ha parcel for $15.5 million delivering a land rate of $654 a sqm.” O’Connell concluded.

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