13 Melbourne is currently in the midst of a major phase of industrial property supply. Completions (greater than 5,000 square metres) reached a record 1.1 million square metres last year are on track to reach 970,000 square metres across 46 projects for 2022. Around two thirds of completions due this year are in the West (across 29 projects), one quarter in the South-East (11 projects) and 10 per cent in the North (6 projects). The majority of completions due this year have been underpinned by pre-commitments or have secured tenants during construction. The largest examples include vidaXL, Myer, Early Settler and PF Logistics. Based on projects under way and a sustained period of low vacancies driving rents higher, we expect completions to remain historically high at around 970,000 square metres per annum until the end of calendar 2024. We already know of 54 committed projects for 1.15 million square metres and are confident that more will emerge. Material shortages and construction cost pressures are likely to continue for the next 12 to 18 months, challenging, but not derailing project delivery. Major developers continue to compete hard for pre-leases, keeping pre-lease rents competitive with existing building prime rents, although both are rising notably. It is common to see speculative projects built in tandem with a pre-commitment being secured. Around 25 per cent of the projects due this year started on a speculative basis, although much of this space has already been leased. In time, these pressures should ease as supply chain disruptions eventually normalise. We expect the recent mix of pre-lease and spec building to continue as developers look to capture both longer and shorter turnaround needs. Speculative development also allows developers to pass through cost increases whilst the market stays tight. Supply Supply outlook Melbourne industrial demand and new supply Industrial Market Monitor | 2nd Half 2022
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