Activity levels across the Melbourne Industrial market have shown considerable uptick in 2017 after two years of limited investment. High demand for properties had been stifled by a shortage of available stock however improvements in these stock levels has resulted in strong compression in investment yields. The broader strong fundamentals of Melbourne including strong population growth, robust employment growth and continued high housing investment levels has all resulted in high market confidence which has fuelled this growing interest in commercial assets.
Locally in the Kingston LGA interest in the industrial market has come from both private investors and owner occupiers during this time where interest rates are low and FOMO drives down yields to sub 5% for some assets. The sub $1.5million price point has been the most active and has witnessed sizeable capital value growth in some suburbs, while the strong reduction in days on market highlights this active, ongoing demand for quality investment stock.
After two years of subdued investment activity across Kingston LGA due to limited quality stock available to the market, 2017 looks to make the beginning of an investment level recovery. During the first 8 months of the year, sales volumes have reached $78.79million just behind the full 2016 and 2015 calendar years result of $86.35million and $83.63million respectively. The 2017 results to date have resulted in 59 transactions including the $23million sale at 13-27 & 29-42 Whiteside Road Clayton South in May on a yield of 6.84%, this was a fully leased investment offering an 8 year WALE. All remaining transactions for this year have been in the sub $5million price range with an average sale price of $1.03million (up from $951,032 during 2016). There is still reluctance by many owners to sell during this time where both yields and interest rates are low due to uncertainty on alternative investment options. Clayton South has the greatest volume of these transactions during 2017 due to this large sale totalling $29.621mill, more traditional sales volumes favours Braeside which totalled $14.765mill with an average sale price of $922,813 followed by Moorabbin of $13.141million with an average of $1.195million.