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Owner-occupiers driving industrial land prices up 20pc in Melbourne’s west
25-29 Drake Boulevard, Altona. Image: CBRE
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  • Owner-occupiers are driving growth in the industrial land sector in west Melbourne, with prices rising 20 per cent in eight months
  • A shortage of existing built stock is encouraging more owner-occupiers to purchase and construct
  • Land rates for industrial land in the industrial heartland are nearing $600/sqm, up from, $150-$200sqm in 2016
  • "Demand for quality industrial land and buildings within infill locations in western Melbourne is soaring to unseen levels," CBRE's Ricardo Cappelletti says

Land prices for industrial sites in Melbourne's west have climbed by more than 20 per cent in the last eight months.

This is off the back of strong owner-occupier demand with 2021 raising the bar for land sales, according to CBRE.

Prices rose continuously through to August 2020, when a 6446sqm lot within Axiom Estate in Truganina established a new record land pricing of $385/sqm, after having sat in the $150-$200/sqm area as recently as 2016.

A string of sales in 2021 has brought the price up further, with land rates for vacant sites now approaching $600/sqm in the industrial heartland of west Melbourne, according to CBRE.

The benchmark currently stands at $585/sqm after an owner-occupier purchased 4 Delivery Drive in Truganina last month, paying $2.92 million for the 4987sqm lot within the Connect West Estate.

A shortage of existing built stock is encouraging more owner occupiers to buy land and construct, competing with developers and pushing prices up, according to CBRE.

Sun Yee International, a supplier of camping and 4x4 accessories, is a prime example, having paid $3.46 million for a 6107sqm development site in the Access Altona sector, or $566 per sqm.

The online company presently leases 32 Drake Boulevard in Altona, but has just purchased 25-29 Drake Boulevard with plans to construct a 4000-square-foot headquarters to suit its expanding operations.

"Demand for quality industrial land and buildings within infill locations in western Melbourne is soaring to unseen levels," CBRE industrial & logistics Australia manager Ricardo Cappelletti said.

"Sun Yee International’s purchase is indicative of the increased activity we’re seeing from owner occupiers.

"It wanted to move from tenant to owner and, given the lack of suitable stock, Sun Yee International explored a titled land acquisition that would allow it to build and move in line with its lease expiry."

Mr Cappelletti managed the Drake Boulevard sale with CBRE colleagues Harry Kalaitzis, Tom Murphy and Fergus Pragnell on behalf of the private vendor.

"As recently as four or five years ago, prices were sub-$200/sqm, and industrial land was generally sub-divided and sold down," Mr Cappellitti added.

"Since then, institutional groups have steered away from sub-dividing land for resale, instead largely looking to pre-lease and construct sites for large-scale occupiers.

"Now we’re seeing more and more owner occupiers enter the picture, increasing demand and ultimately prices."

The industrial real estate market has been red hot in recent months, capped off by the $3.8 billion sale of Blackstone's Milestone logistics property portfolio to an ESR Australia and GIC's joint venture.

According to CBRE, to meet the continued rise of online shopping, nearly 500,000 square metres of new industrial and logistical space will be required each year.

The agency also noted that the industrial vacancy rate across Australia falls to a historic low of 2.24 per cent, with eCommerce, data centres, the non-discretionary retail sector and cold storage demand driving sales.

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