Melbourne records $6.87bn industrial sales in 2021

MELBOURNE, 14 April 2022 – A total of $6.87 billion in all industrial sales transactions were recorded in the Melbourne market during 2021 according to JLL Research data. This is the second consecutive year in which Melbourne has seen the highest proportion of industrial sales volumes in the country, having accounted for 38% of the national total in 2021, according to JLL’s Industrial Investment Review & Outlook 2022.

Melbourne was overrepresented in major national industrial portfolio transactions in 2021, with 45 percent of the capital deployed into the largest five portfolio transactions of the year attributed to the Melbourne market.

JLL’s Senior Director of Capital Markets Industrial & Logistics Adrian Rowse said, “In 2021 there was a focus from some buyers on increasing exposure to the Melbourne market through scaled acquisitions.”

“With 45 percent of portfolio transactions attributed to Melbourne, this demonstrates the city’s continued importance as an industrial and logistics hub for Australia, and the increasing diversification of manager’s mandates.”

“Melbourne will likely continue to be a leading market in terms of last mile logistics facilities, with the combination of a significant population spread across multiple major urban and suburban centres placing pressure on retail supply chains,” he said.

The largest single-market investment transaction recorded in 2021 was the $141 million sale & leaseback of two food manufacturing facilities from Patties Foods on a 30-year sale & leaseback basis, which was acquired by Charter Hall’s Direct Industrial Fund No. 4.

Similarly, to Sydney, the weight of capital which is looking to deploy into the Melbourne industrial market continues to exceed the volume of opportunities that are available. As such, the market-wide prime average yield midpoint compressed by 94 basis points over the last 12 months, to 3.63 percent - the largest full-year compression that JLL Research has recorded for the Melbourne market.

“Melbourne is one of Australia’s largest industrial markets, attracting onshore and offshore investor interest. With one of the fastest growing populations in Australia for nearly a decade, expectations of returning robust population growth forecasts, record levels of infrastructure investment and a diversified economic base, conditions are supportive for continued tenant demand in the medium to long run,” Mr Rowse said.

Macro themes are driving transaction volumes. Investors have confidence in occupier demand and rental growth.

JLL’s Senior Director and Head of Industrial & Logistics Research - (Australia) Annabel McFarlane said, “Investors are confident in the Melbourne and Sydney occupier demand story with gross take up weighted 42% to Melbourne and 33% to Sydney in 2021. Elevated demand and scarcity of zoned industrial land supports the investment thesis.”