Melbourne industrial supply breaches 10-year quarterly average

Over 555,000sqm of new stock was completed over Q2.

Industrial supply in Melbourne increased significantly over the quarter, with 555,853 sqm of completions brought to market, 233.7% above the ten-year quarterly average, according to a JLL report. Of the supply, 75.3% was pre-committed at practical completion.

“The largest portion of quarterly supply for the Melbourne market was delivered in the West precinct (59.6%). This was followed by the North precinct, which accounted for 32.9%, and then the South East precinct for the remaining 7.5%,” the report added.

Here’s more from JLL:

Gross take-up increased by 138.9% q-o-q to 362,450 sqm in the quarter. This was 32.0% above the ten-year quarterly average. The West precinct accounted for the largest portion of quarterly leasing activity, with 55.5% of Melbourne’s gross take-up.

The Manufacturing sector accounted for the largest portion of quarterly take-up in the Melbourne market (38.5%). This was followed by the transport, postal and warehousing sectors at 32.0%, then private/undisclosed with 15.4%.

Rent growth is mixed across precincts

In Q2, rent growth in the West and North precincts was subdued due to increased completions and rising vacancies. Incentives increased across all grades. Conversely, the South-east precinct saw a significant 8.8% rent increase due to tight vacancy.

Melbourne’s industrial transaction volume totalled AUD 1.3 billion over the quarter. Two major portfolio sales accounted for 55.3% of this total. The Q2 quarterly volume was 156.1% above the ten-year quarterly average.

Outlook: A more nuanced market

With only 34.1% of the 776,382 sqm under construction in 2024 (in Melbourne) being pre-committed, an increase in vacancy rates is anticipated, albeit from a very low base.

Rent growth in all precincts is likely to slow down over the remainder of the year as the market absorbs the record annual supply received in 2024.