May 2016 – Melbourne Industrial Kingston LGA

20 May, 2016 / Vanessa Rader and Ryan Amler

During 2015, the state of Victoria has continued to cement their strong economic position, with increases in GSP which has shown a benefit to employment and population growth.

This strong economic growth has also been aided by the continued lowering of interest rates and favourable exchange rates which has encouraged investment both domestically and off shore into the state. This has had a beneficial knock on affect across the broader industrial market resulting in strong demand for both purchasing and leasing assets keeping values and yields competitive.

Kingston LGA has witnessed good levels of demand, albeit in the sub $850,000 price range during 2015 highlighting this market a strong private investor and owner occupier location. To date, this local demand has resulting in favourable capital values with a reduced number of days on the market.

Sales volumes across the Kingston LGA have fallen in 2015 compared to 2014 high results where $246.11 million changed hands. This high in 2014 was driven by a number of larger institutional sized transactions including the sale of the Kingston Distribution Centre in Braeside for $36.60 million and a number of larger facilities in Mentone. During 2015 there were 97 transactions which is only slightly down on the 2014 where 110 were completed highlighting the average sale size reducing to just $860,000 (from $2.37 million prior). Total volumes for the calendar year was recorded at $83.63 million which is more in line with the historical results of the region and given the reduction this average sale size. Industrial units and small warehouse properties have been in strong demand during this year which supports the private investor and owner occupier demand particularly in the sub $1 million price range.

Enquiry levels continue to be high across the broader industrial market in the South East of Melbourne. A combination of owner occupiers and investors continue to seek out opportunities to invest during this time of cheap finance and diversify from the strong growth in the residential market. Foreign investor interest was witnessed during 2015, however more recently this enquiry level has reduced which can be attributed to changing sentiment around FIRB investment levels and finance regulations regarding lending practises to non citizens. Regardless, the local buyer pool continues to be robust however a broad choice of product has done much to reduce urgency in the market with auction sales making way for regular private treaty listings and keep days on market data closer to 80 days. Moorabbin/Cheltham have yielded the best result with average days of market just 75 followed by Braeside at 78, this relatively short turnaround time for commercial assets is testament to the state of the local market while Mordialloc is slightly higher at 82 with the Clayton South location showing the longest sell time at 97 days.

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