Here’s a rundown of how Melbourne industrial rents fared in Q1

Rents in the South East precinct grew 7.9% to AUD109 per sqm per annum.

Industrial rents in various precincts in Melbourne continue to increase, most notably in the South East precinct which recorded quarterly rental growth of 7.9% q-o-q (AUD 109 per sqm p.a.). 

According to JLL, availability constraints continue to persist with 69.7% of stock pre-committed in 1Q22 and 82.4% of 2Q22 stock already pre-committed. Rental growth is being fuelled by companies needing to address supply chain issues and business growth. 

Here’s more from JLL:

The West precinct recorded prime net rents of $91.25, a 1.4% increase from 4Q21. Over the past 12 months, rents in the precinct have grown 15.0%, exemplifying the strong period of rental growth Melbourne is experiencing. Secondary rents in the precinct currently sit at $82.50, which represents 2.3% quarterly growth, and 20% growth over the past 12 months. 

The spread between prime and secondary rents continues to narrow, representing the strong demand in the sector that is pushing occupiers to sub -prime assets because of the lack of supply of industrial assets. Pre-lease rents currently sit slightly higher than secondary rents, at $86.25. A decreasing spread between prime rents and pre -lease rents is a direct function of increased occupier demand and indicates the elevated levels of demand currently within the market. 

The South East precinct recorded the strongest quarterly rental growth, with prime rents growing to $108.86 (7.9% increase q - o -q) and secondary rents increasing to $93.41 (7.3% increase q - o -q). Pre -lease rents currently sit at $105, which represents 3.3% quarterly growth, and 9.9% year -on -year growth. Prime rents in the South East are the strongest of all precincts, as the precinct continues to exhibit strong growth capacity. Prime rents marginally outpaced the growth of secondary assets in the precinct over the past year, indicating there is a growing shift in demand to allocate assets within the precinct. 

Rents in the North precinct experienced mild growth over the quarter, growing 3.6% to $87.63. Relative to other precincts, yearly growth has been subdued, sitting at 7.3%. Secondary rents in the precinct currently sit at $81.96, which represents substantial yearly growth of 20.8%. As relative completions decrease in the precinct, those looking for assets strictly within the precinct have less access to prime assets, which drives growing rents for secondary assets within the precinct.