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Frasers Property Industrial and ESR Australia have partnered up to to acquire a 64.4ha site of land from Salta Properties in Melbourne’s south-east.
The partners plan to develop it into a premium industrial estate with a total end value of around $900 million.
The pair plans to develop most of the site, at 635 Hall Road, Cranbourne themselves with part of the land earmarked for small lot sub-divisions for sale.
Work is anticipated to start on the site, 43km south-east of Melbourne's Central Business District, in late 2024 and the first buildings completed in 2026.
A confidentiality agreement means the price will not be disclosed.
Between them, Frasers and ESR have already delivered more than 320ha of industrial estates in Melbourne’s south-east.
The region is is a strong strategic location for industrial estates thanks to its access to major arterials including the Western Port Highway, South Gippsland Freeway, EastLink and the future Salta Properties’ Dandenong South Inland Port.
The JV’s newly acquired site is in an established industrial sub-market of Melbourne, which, they say, makes it an attractive location for customers in e-commerce, manufacturing, logistics and distribution.
Frasers Property Industrial managing director Ian Barter said that the planned development would not only integrates premium logistics and warehouse solutions but "prioritises sustainability and access to amenities, aiming to enhance operational efficiency and wellbeing for our future customers”.
“The deal aligns with Frasers Property Industrial’s strategic objective to expand our development pipeline in key areas across Victoria, adding to our 2.2 million-square-metre, high-quality land bank in Australia.
“The increased demand for premium industrial assets persists and this site holds immense potential, allowing us to cater to the diverse and evolving needs of our customers.”
ESR Australia chief executive Phil Pearce said the 50:50 structure of the joint ventured provided both parties “access to the highly desirable Hall Road location and enables the combined might of the JV to deliver much needed prime logistics facilities to Melbourne’s severely supply constrained south east market”.
Andrew O’Connell from GO Commercial Industrial brokered the deal.
Knight Frank’s Australian Industrial Review Q4 2023 report has found east coast industrial vacancy increased by 7 per cent in the last quarter of 2023.
It said accelerated supply in a climate of steady tenant demand was eroding the severe undersupply of last year, allowing for a return towards more normal vacancy and rent growth.
Sydney remains the tightest market with only 76,175sq m available, up from 48,716sq m in the third quarter but still functionally at gridlock.
Melbourne vacancy lifted by 18 per cent while Brisbane fell by 10 per cent.
There was a record 2.6 million square metres of new East Coast supply in 2023 and this may be more than matched in 2024, according to the report.
Sydney retained the highest annual rental growth over 2023 at 16 per cent, ahead of Brisbane at 15 per cent and Melbourne at 8.8 per cent.
Investment volumes fell by 26 per cent last year, impacted by higher funding costs.
“Yields have now substantially reset and investors are poised to return to acquisition mode in 2024,” the report said.
Knight Frank National industrial logistics head James Templeton said the level of construction was beginning to ease undersupply in the market.
“Annual take-up across the East Coast was 2.8 million square metres, only 5 per cent below 2022, as tenant activity has somewhat defied softening sentiment on rental affordability,” he said.
“Sydney was the only city to breach a million square metres leased, with Melbourne slightly behind.
“With more than a million square metres of pre-committed space expected to be delivered in 2024, the supply for this year may well be on par with last year.
“The drive for efficiency and to meet ESG standards will continue to support above-trend demand for new space.”
