Melbourne’s industrial vacancy has reached its highest level in five years with 864,000 square metres now vacant.
Gab Pascuzzi, Knight Frank Senior Director, Head of Industrial Division, said that in the three months leading to October 2014, the level of vacant space within Melbourne’s industrial precincts has increased 45 per cent above its historical average.
Mr Pascuzzi said there are 79 industrial buildings now available for lease, with 35 being categorised as prime grade. The level of speculative building commencement in the last 12 months has halved due to the high vacancy level.
Vacant stock in speculative buildings fell by 5,093 square metres to reach 124,922 square metres in the past quarter.
According to Richard Jenkins, Victorian research director at Knight Frank, as at October 2014, the majority of vacant stock is located in Melbourne’s Northern and Western regions.
“While the North has seen its vacancy grow by 47 per cent over the past six months, the West has seen a reduction (6 per cent) in its vacant space. Limited options in the Eastern and City Fringe regions have contained the available space at 8 per cent and 1 per cent respectively of the total vacancy in Melbourne,” said Mr Jenkins
“In comparison, the vacancy in the South East has reached 209,066 square metres, and now accounts for 24 per cent of the Melbourne’s total available space. Growing by 75 per cent from April 2014, the majority of space additions in the region have resulted from higher secondary grade existing options.”
Mr Pascuzzi added that Melbourne’s industrial vacancy has been tracking upwards for the past 24 months, with majority of the stock coming from the existing facilities, with speculative construction levels easing.
“The trend of tenants upgrading their accommodation from secondary buildings into prime facilities is forecast to continue as landlords remain competitive in securing quality tenants,” Mr Pascuzzi said.
Mr Pascuzzi said that in line with the increasing levels of vacancy, prime and secondary industrial asking rents have continued to ease and incentives remain a feature of the market.
It is anticipated that rental levels will remain under pressure until vacancy has peaked.
According to the latest Knight Frank report, the eastern region commands the highest rents for prime industrial space averaging $81 per square metre while the north is the most affordable at $57 per square metre.
The overall average industrial space rate is $72 per square metre.