Logistics property buyers seen as moving on Melbourne market

Demise of car-making to cause huge amount of property to open up, Colliers says

Logistics property buyers seen as moving on Melbourne market
Land is opening up in Melbourne’s port precinct and in the east and north


With the car-making industry tailing off in Melbourne, property firm Colliers International foresees a proportion of vacated land being snapped up by transport and logistics (T&L) players.

In analysis titled Time is fast approaching, Colliers notes that the south-east precinct, Melbourne’s original manufacturing industry centre, has the highest concentration of impacted industrial space, at almost 350,000 square metres (sqm).

"If around 30 per cent of local manufacturers survive, as has been estimated, then the south-east alone can expect around 245,000sqm of space to become vacant in late 2016 and into 2017," the firm says.

The analysis foresees some of the space vacated by automotive suppliers or manufacturers is likely to be re-positioned as logistics space, advanced manufacturing or even alternative uses such as residential or large-format retail.  

Not that the imported car and parts retail sector is also on the way out.

"Early indications are that more suppliers are diversifying into other industries than was previously thought," Colliers national director of industrial Tony Iuliano says.

"In the north, a number of suppliers are amending their production techniques to become a supplier to Melbourne’s burgeoning caravan manufacturing industry, which doesn’t face nearly as many export threats and remains in high demand.

"The automotive aftermarket is also a sector that is continuing to demand supplies from local manufacturers.

"Most of Melbourne’s car manufacturers require at least 10 years’ worth of parts to be made available for aftermarket and servicing purposes, so there is still demand for their product.

"A number of firms are choosing to produce this 10 years of supply now, store the product – thus creating warehousing demand – and move on to utilising their factories to supply other industries."

Meanwhile, over the past 12 to 18 months, Frasers Property has witnessed a significant shift from within the automotive industry to relocate to new premises that are centrally located and deliver supply chain efficiencies, Colliers notes.

More than 150,000sqm has been leased to automotive or related groups at Frasers Property’s prime industrial estates in Melbourne and Brisbane.

This has included logistics facilities for Ceva Logistics involving a parts warehouse for Nissan, Infiniti and Renault totalling 97,535sqm in Melbourne and Queensland, a new 5,000sqm Melbourne office for BMW, and 10,000 sqm for Dana in Melbourne.


Existing Frasers Property portfolio customers have also secured leases Melbourne including Sumitomo’s 12,000sqm and L+L Products’ 14,000sqm.

"Frasers Property is witnessing significant automotive movement in Melbourne due to the concentration of users in this state," Reini Otter, Frasers Property executive general manager, C&I, says.

"There are several relocation drivers for these companies including a focus on supply chain efficiencies through new buildings that feature sustainability initiatives and accessibility to manufacturers, key dealer networks and major road networks, the airport and Melbourne ports."

At Colliers, Iuliano notes there are also a number of emerging industries increasing their demand of industrial space, including research and development (R&D) and agriculture.

"These industries have the potential to mop up some of the vacated space leftover from those parts suppliers that will close down," Iuliano says.

"Melbourne has long been Australia’s R&D capital. Biotechnology, pharmaceuticals, biosecurity and agricultural research are some of the areas in which Melbourne is a world leader.

"High-tech manufacturers are also still actively looking for space in Melbourne’s north and south east."

Another area making a major impact on Melbourne’s industrial market is the agriculture industry supply chain.

Chinese demand for Australia’s ‘clean and green’ food products was continuing to grow, and many food and food product manufacturers are emerging locally as a result.

Victoria alone accounts for 10 per cent of the total globally traded dairy products.

Colliers finds demand from these suppliers, as well as for warehouse space to store the goods near the port and airport, increased markedly last year.

The analysis finds that the impact of the closure of the motor vehicle manufacturing industry on Melbourne’s industrial market had so far been limited.

"However, we expect that at the end of 2016 – particularly for businesses located in Melbourne’s north – the trickle of manufacturing facilities and excess land entering the market will become much more profound, as some businesses finally cease production," Iuliano says.

"The good news is that a number of parts suppliers seem to be using this time to find ways to diversify their business, and particularly their customer base.

"The huge landholdings of Ford, Toyota and GM Holden also provide opportunities for the institutional development sector, and the imminent sale of GM Holden’s 37ha in Port Melbourne will be the first example.

"Businesses with excess industrial land or facilities that they will need to dispose of in late 2016 and into 2017 are encouraged to think about their real estate strategy now, as timing in the wake of such a large industry shutdown will be crucial."

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