Melbourne is driving a spike in industrial vacancy all the way up the east coast of Australia with a 6.2 per cent increase in empty space recorded in the March quarter.
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While Sydney and Brisbane recorded falls in vacancy levels, Melbourne's growing industrial precincts have more larger empty spaces. The coming shutdown of the automotive industry is expected to contribute to an even bigger blowout by the end of 2016.
Knight Frank senior analyst Kimberley Paterson said the rise in vacancy is underpinned by an increase in prime grade backfill space, which has been left empty as tenants upgraded and consolidated from multiple locations into new purpose-built facilities.
Melbourne now has more than 1.07 million square metres of vacant industrial space across 94 buildings, with the increase dominated by prime stock rather than secondary buildings.
It's the highest level recorded since the Knight Frank Industrial Vacancy Report first started in 2009 and is 62 per cent above the long-term average.
The vacancy rate among prime buildings rose 16 per cent to a record high of 476,965 square metres as several large spaces became empty in the west, including CEVA's Derrimut facilities at 70 Swan Drive and 64 Westpark Drive.
Levels of empty secondary stock actually fell 2.5 per cent to 521,772 square metres over the three months to April as older spaces were leased, for instance Seaway Logistics took up the 16,144 square metre space at 11-25 Toll Drive in Altona North.
Completed speculative developments accounts for only 4.2 per cent of the total vacancy rate.
While the west recorded the biggest increase in vacancy, the south-east posted a fall in vacancy, down 17.4 per cent across 16 buildings.
Smaller strata developments are starting to take hold in the outer east in place of the larger industrial occupiers that have vacated, Colliers agent Jonathon Mercuri said.
"The outer east also lacks large greenfield industrial sites and, for this reason, many large users have moved to the south-east or even the western markets of Truganina and Derrimut," Mr Mercuri said.
Developers of strata developers have seen strong sales at around $350 a square metre to e-commerce businesses and smaller high-tech manufacturers encouraged by low interest rates.
"Industria Knoxfield, for example, developed by Wilmac Properties and Folkestone, has sold 75 per cent of stage one in three months. As a result, they've fast-tracked the second release to satisfy demand," he said.
In the west, CBRE sold six lots sold at Cadence Property Group's Altona land subdivision, fetching between $130 to $150 a square metre to a range of buyers including civil construction group Civilex/Conset, road construction contractors Elite Roads and transport group Niche Logistics.
Nearby in the Angliss Industrial Estate at Laverton North CBRE also sold a vacant warehouse-office property on a 2621 square metre site 72 William Angliss Drive.
CBRE's Tom Murphy said the vendor, Pesa Investments, decided to sell and take advantage of the healthy owner-occupier market after spending months focused on a leasing campaign.
CBRE's global report on industrial rents showed that Sydney is one of the most expensive industrial markets in the world, coming in at ninth place with users paying an average US$25 a metre compared with Melbourne at No.46 at US$16.29 a metre. Brisbane, Perth and Canberra were also more expensive, coming in the top 20. Hong Kong is the most expensive global industrial market as the lack of space requires high-rise facilities that cost an average of almost US$90 a metre.
