Interstaters Swarm Over Melbourne Industrial

An increasing number of interstate syndicates, funds and private investors are lining up to purchase Melbourne’s industrial property assets spurred by Victoria’s nation leading growth status and the lack of comparable prime investment opportunities in rival capitals.

According to Savills Divisional Directors Investments, Chris Jones and Ben Hegerty, enquiry from interstate buyers is now at its highest level post-GFC, accounting for 30 to 50 percent of enquiry for individual properties in the sub $20 million market.

"We have sold 17 properties in this category since March and eight of those have sold to interstate buyers from WA, SA, QLD and NSW, for more than $150 million. In a number of other cases the interstate buyers were simply outbid by local buyers and in others were serious contenders.

"That is a very strong interstate contingent and one which has understandably been very much welcomed and appreciated by Melbourne vendors," Mr Jones said.

He said a lack of comparable investment stock at home, particularly in Sydney and Perth, had been the critical factor, while attractive long term capital growth and rental prospects, Melbourne’s reputation as Australia’s leading industrial city, and Victoria’s nation leading population growth and economic performance, provided a very positive future market assessment.

"Victoria has long held the title of Australia’s most attractive industrial destination based on the availability of relatively cheap and easily serviceable land, its superior freeway network and port facilities movements.

"More recently a dearth of quality investment properties in interstate markets, particularly Perth and Sydney, and the ability to acquire assets with high underlying land values, and in many instances higher and better future uses, have swung the investment spotlight firmly towards Melbourne," Mr Jones said.

Mr Hegerty said the fact that several of the deals had been initiated off-market underlined the strength of demand for Victorian assets.

"Pent up demand from opportunistic investors and the competition that creates for limited opportunities has resulted in a string of off-market transactions and in the majority of cases it has been investor driven," Mr Hegerty said.

In the latest (unreported) off-market deal Adelaide based commercial property syndicator, Harmony Property Syndication, has paid $10.75 million on a yield of 7.1 percent for a substantial industrial property at Hallam.

The 1-5 Siddons Way property - a 9,574 square metre office and warehouse facility on a 15,300 square metre allotment - was sold subject to a long term lease, expiring in 2026, to national tenant Pakcentre Marketing Services, at a current rental of $765,920 per annum net.

Mr Hegerty said just released ABS data revealing annual economic growth (Gross State Product) in Victoria had bounced back to 2.5 percent - stronger than NSW and Queensland and all other states bar NT and WA - should provide investors with further confidence that Victoria was a sound investment destination.

One of the key aspects to the GSP turnaround has been population. ABS data shows Victoria had the fastest national growth rate of all capitals in the year to March of 1.7 percent and has lead the national average since 2013.