Why are developers pushing to speed up the delivery of industrial real estate projects?

Off the back of 2020, a year of record low vacancy rates and record levels of industrial leasing activity, speculative industrial real estate projects along the east coast have now topped one million square meters.

Industrial property has been outdoing Australia’s hot housing sector, which is representative of what experts are calling the pandemic property market. While industrial property is dealing with record-low vacancies, the residential sector is seeing record high vacancies. A stark comparison of two markets within the same country.

The drive from the rise in online shopping flipped industrial property on its head, and as a result, a wall of institutional capital is looking for a way into the booming sector, with an unprecedented return of 23 per cent last financial year.

Nationally the vacancy rates for industrial and logistics facilities (greater than 5000 square metres) fell to 2.8 per cent in the third quarter of 2021, which is down from 5.1 per cent at the same time in 2020.

As a result of this limited supply of high-quality industrial properties, businesses that previously relied on housing development, are now turning around to develop and deliver modern, sustainable prime-grade industrial real estate assets.

In fact, this demand for industrial space is forecast to remain well above the long-term average over the next five years, with gross demand expected to exceed approximately 3.8 million square metres by 2024.

So, this has naturally led to more development projects in the works than ever before for the industrial market. Rising developer confidence is showing a sharp turnaround from last year when development projects were deferred due to uncertainty caused by the pandemic. This is why developers are now pushing to speed up the delivery of their new industrial assets and to keep up with the continuous demand.

In Sydney, more than 380,000 square metres of industrial developments are expected to be completed by next year, which is the highest level of industrial development in the area since 2008. While in Melbourne, almost 500,000 square metres of projected development are due to be completed.

More than half of the projected industrial developments being built in Melbourne are warehouses where construction has begun, with no tenants locked in. These will be especially important for an area where the vacancy rate for prime industrial real estate has fallen to just 1 per cent.

Now that there is much more stability throughout Australia’s largest capital cities, it is understandable that developers really want to speed up the construction of all of their new industrial developments. If the future projections are correct, it won’t necessarily matter if construction is completed in 2022, or 2024 the demand and low vacancy rates are still expected to stay put across Melbourne and Sydney.

Industrial property is currently the country’s most sought after property sector and is only expected to continue growing over the next five years.

So, will you be looking to get your hands on an industrial asset in the future?

How could drone technology change e-commerce delivery services and industrial real estate in the future?

The introduction of new technology creates a domino effect throughout almost every industry. Not many people are aware how new technology, such as electric cars and drone technology can actually impact something as seemingly far-fetched as industrial real estate.

However drone technology and the use of it for delivery services, influences the e-commerce sector and as a result impacts the industrial real estate sector.

Recently Vicinity Centres partnered with Google’s Wing delivery service, in a bid to be a global first in a way to deliver goods. The pilot scheme was launched from the rooftop of a Queensland mall, specifically the Grand Plaza in Logan, just south of Brisbane. This drone delivery service has actually shown some success and has now completed more than 2500 contactless deliveries to customers nearby.

Will other large players follow suit after Vicinity Centres move?

Drone technology is actually a great way to deliver goods, especially in the middle of a pandemic. As a result of the trial success, the Wing owned, Google parent Alphabet, has set up its own delivery hub in Canberra in a hope to expand the first of its kind mall-top service.

Vicinity Centres is the second largest listed owner of shopping centres in Australia. Which is why they are looking to expand the drone service to a plethora of other suburban shopping centres, who have plenty of airspace for drones to be able to run. Almost two-thirds of the population live within 30 minutes of one of Vicinity’s 61 shopping centres, making it the perfect group for drone delivery trials across the country.

What does the future of technology look like for the industrial industry?

This is all a result of the forever changing retail industry that needs to adapt to the future, especially with the hugely booming e-commerce sector. So, how does this new model of delivery impact industrial real estate?

This will impact the use of industrial warehouses for businesses as the future is heading towards a place where these drone deliveries won’t just occur from shopping centres, but straight from the warehouse fulfilment centres.

Future plans will lead to the advance of logistical hubs, and they will be both fulfilment centres, and delivery hubs. Just as the introduction of electric cars will do, drone technology will lead to the change of industrial real estate. It will eventually create a need for industrial property to accommodate drone technology, and upgrade properties as needed.

Owners of industrial property will continue to accommodate the future technological changes, including the adaption of drone technology and mixing logistics and fulfilment with delivery. In turn larger industrial hubs will be created in an effort to handle all the needs for e-commerce as it grows and changes.

Keeping on top of these trends is a vital aspect of both e-commerce and industrial real estate. There will be no-telling how drone technology will ultimately change delivery services and logistics, so don’t forget to always keep an eye on the trends for any further changes.

As the industrial boom still has a long way to go, how will the growth in electric vehicles impact the market?

The current lockdown and border closures across Australia are impacting a vast range of businesses; however, it is only boosting Australia’s industrial property sector.

A massive boom in e-commerce and last-mile logistics is causing the need for  industrial property to cater to the resultant big-shed leasing frenzy. With warehouse construction at an all-time high, rising property prices and a shortage of industrial space, the industrial boom still has a long way to go.

The sheer weight of this market rests upon the shoulders of logistics and transportation, and any move in their market also impacts industrial property.

Logistics and transportation have been wrangling with the task of creating a more environmentally friendly, long-term business model for quite some time now. This includes the use of electric vehicles. So, naturally, the rise in electric vans and trucks is jarring the industrial property sector.

There are currently new fleets of electric vans and small electric trucks already on urban roads across the country. They are delivering anything from mail to furniture. However, the switch to electric vehicles has only just begun, and the current fleet is only making a dent in the overall electric vehicle goal of the transportation and logistics sector.

It isn’t a simple feat, but it is one of the goals of many transport companies who are looking to reduce their environmental footprints. As organisations, they have sustainability goals that they want to meet. These goals will gradually push their way into the industrial property sector.

One of these companies is Linfox. The Linfox executive chairman Peter Fox said, “The majority of Linfox’s carbon emissions comes from transportation tasks”. So, as they move towards their zero-emissions goal, they will need to change their fleets and ultimately become carbon emission friendly.

The current rise in the popularity of electric vehicles is not only a prominent topic for logistics and transportation. Throughout the industrial property sector, developers predict the inevitable future that they will need to meet the demands of environmentally conscious tenants.

Owners of industrial property will eventually need to accommodate the future environmental goals of their tenants. This means some properties will need an overhaul in terms of upgrades to accommodate these growing needs. While it may be a costly endeavour, what could cost developers and owners more would be if they were reluctant to the inevitable change and find themselves behind the trends when it’s too late.

Even changes to accommodate electric vehicles will be huge, from increasing power to sites and the space to fit charging stations. It won’t only involve the property owners but also electrical companies.

The government also understands the private sector plans for an increase in electric vehicles. A paper called the “Future Fuels Strategy” outlines the government’s plan of funding and grants to assist with the shift to electric vehicles. This includes co-investing with the private sector in regard to changing infrastructure, such as installing chargers on industrial properties.

The Victorian government specifically has also committed to increasing the number of fast chargers across Victoria, including rural areas to assist with transport and logistics.

While we all know change is on its way, there will be no telling the full-scale impact it will have industry-wide on industrial property and the market, until it happens.

Keeping ahead of these trends is vital, especially in a volatile industry such as industrial property. So, how do you think the rise in electric vehicles will impact the sector?

Just over one year on, industrial property still continues to hit new highs

It has now been just over a year since the pandemic wreaked havoc on the Australian economy. While this has undoubtedly been an incredibly tough period for many industries, this was not the case for the industrial property sector.

When the pandemic reshaped the Australian economy, the June quarter delivered the biggest ever uptake of industrial space. This was a direct chain reaction to the construction and manufacturing industries needing to secure more space in response to the growing need to hold more stock onshore. Since the pandemic disrupted the global supply chain, industries were required to have everything they needed onshore. They could no longer stick to their pre-pandemic supply chain timeline, and the product needed to be already onshore before selling it to consumers.


The e-commerce boom also helped record low vacancies across the board. They were then driven lower by Melbourne’s long lockdown period between July and November, and the introduction of government benefit packages, which is why Melbourne saw the highest portion of leasing activity through this time. With online activity still showing no sign of slowing even into mid-2021, new highs are expected to be hit within the industry throughout the rest of the year.

The gross take-up of industrial space over the past 12 months has continued to rise, with a totalled 3.82 million square meters. This is a 59 per cent increase on the 10-year average for 2.4 million square metres per annum. Melbourne saw the highest portion of leasing activity, equalling 38 per cent of the national total. Alongside the Victorian capital, two other prominent capitals Sydney and Brisbane accounted for 90 per cent of all the uptake nationally.

Naturally, with vacancy rates of industrial property hitting an all-time low, it created a flow of effect into the property sector. With limited industrial space available, rents are rising as businesses compete to land the perfect industrial areas.

As a result, new developments are showing up across the country to keep up with industrial demand and provide suitable spaces for every business, whether that’s e-commerce, manufacturing, or construction. Over 800,000 square metres of space for industrial expansion are set to commence before the end of the next quarter.

So, now as empty sheds are a rarity and vacancy rates continue to plunge, you will need to ensure that you are in the hands of industrial property experts when searching for industrial space.

There is certainly no economic uncertainty within the sector, despite financial hardship still being a prominent factor throughout 2021. Even with exciting new developments on the way, vacancy rates are still expected to remain low and continue the trend of stability throughout the industrial sector. With no hesitation for the future, keep your eye out for the forward-moving growth expected for the rest of the year.

New stamp duty and land taxes – what are their impacts on the property sector?

The end of the financial year has crept up on us once again. This means that not only is tax time almost here but the announcement of the Federal and State Budgets for the 2021-22 financial year.

After all announcements surrounding the budget were made, it was easily clear how the industrial and commercial property sectors were going to be impacted. Over the next year, the property sectors will see another round of tax hikes, leaving our sector to once again absorb additional tax burdens.

Property currently accounts for more than 40 percent of government revenue, and these tax increases brought on by the Victorian government could make Victoria a less desirable place to invest, with the potential to harm jobs and the property economy.

Victorian landowners will have to pay more in the form of significantly increased land tax costs on their business, through their commercial office spaces, and their industrial warehouses. The state will also see increases in stamp duty and a new tax on property investment and development. Stamp duty will be going up 13 per cent, while land tax will go up 15 per cent this year alone, on the back of substantial hikes in land tax over the past 2-3 years.

Both State Governments and the general public at large have the misconception that property owners are ‘millionaires’. The truth is that a large percentage of the residential investors are the ‘mum and dads’ who have scrimped and saved to enter into the residential investment market. Whereby property investment has out-stripped other forms of investment over the past 3-5 years.

Introducing taxes like these at a time when commercial CBD properties are struggling to find tenants, will put an extra burden on commercial real estate, which already struggled throughout 2020. With the land tax increases, being unable to be passed on directly to tenants (land tax is not a recoverable outgoing under the Retail Leases Act) landlords will have no other alternative other than to increase base rents.

These double-digit tax hikes are inevitably going to create a dent in the property investment market throughout Victoria. It is likely that the new government taxes will push current investors out of the Victorian market, and into other states. These Budget changes have reflected that there is a fundamental misunderstanding of the real estate sector throughout Victoria, and its contribution to the economy, especially its influence on our economic recovery, post-pandemic.

The State Government, in particular, is just gouging the buoyant property market, at a time when business is still struggling to come out the other side of constant 12-month COVID lockdowns. This won’t only impact investments, but also everyday Victorian businesses needing warehouses and offices to house and grow their businesses.

The Real Estate Institute of Victoria (REIV) has since expressed its concern surrounding the budget announcements. REIV President, Leah Calnan, has said the tax hikes will make Victoria a less desirable place to invest, ultimately harming jobs and the economy. Continuing on to voice her concern, saying “If the Victorian Government is serious about jobs and housing it needs to invest in real estate, not attack it.”

The next few months will be a crucial time for the sector, as we witness the introduction of these new tax increases. While we will all work hard to adjust and keep the sector moving in a positive direction, the impact of these changes will be clear before the end of 2021.


How is Keysborough keeping up with the times?

Did you know?

  • Keysborough is located 27km south-east of Melbourne’s central business district, and it falls into the local government area of the City of Greater Dandenong.
  • Keysborough was named after the Keys family who founded the town sometime after 1878.
  • The middle portion of the suburb only began featuring industrial developments in the early 2000s.

Keysborough is a prominent suburb within the industrial property scene, as it is where a lot of new larger developments are currently being built. Over the past 5 years, the Keysborough market and its increasing popularity have impacted other industrial areas throughout the Braeside/Mordialloc precinct.

Main roads running through Keysborough including the Dandenong Bypass, Cheltenham Road, Perry Road, and Braeside- Dandenong Rd, are some of the qualities of the Keysborough industrial market, as they create an abundance of access throughout the suburb.

The comeback of the Keysborough industrial market has been building over the past 5 years, but now with the road network improving further, more growth is expected. This comeback has also been strengthened by the new Frasers land subdivision and further speculative construction throughout the south-east suburbs.

Keysborough was also one of the industrial areas that experienced record low vacancies during the coronavirus pandemic, as a shortage for cold storage space and need for dangerous goods handling drove demand for sheds sky high throughout Melbourne’s south-east.

During 2020, Vincent Cold Storage took out a five-year lease on an 8655 sq m cold storage property in Keysborough, and it is suggested from past deals that industrial rents in Keysborough sit around $100 per sq, it is clear from this that industrial property in Keysborough is in high demand.

The suburb and industrial precinct will also benefit from a range of infrastructure projects being undertaken by the Victorian government, including transport infrastructure. The arterial road that connects the Mornington Peninsula freeway to the Dingley bypass, will improve access to the Dandenong South Employment and Innovation Cluster, which borders Keysborough, naturally extending access to the Keysborough industrial precinct. This will create an ever-stronger foundation for an already thriving industrial suburb, which will see further growth as new developments within Keysborough continue to take place.

Major Melbourne hub at home in Moorabbin

Did You Know? 

  • Moorabbin is located 15km south-east of Melbourne’s central business district and is situated in the local government area of the City of Kingston.
  • Most of the eastern side of Moorabbin has been an industrial area since the first development in the mid-1960s
  • The east side of the suburb was originally home to the industrial hubs of companies such as Phillip Morris, Schweppes and Coca-Cola.

Moorabbin is recognised as one of Melbourne’s major industrial areas, along with its surrounding regions, including Moorabbin Airport.

Renowned in the industrial real estate industry as a leading industrial and commercial property hub, due to the abundance of warehouses and commercial properties located within the area.

Currently one of the biggest changes to the industrial and commercial market within Moorabbin surrounds the Moorabbin Airport Corporation (MAC) redeveloping the western parts of the apron and taxiway for commercial use, in order to expand its industrial precinct. While the master plans are yet to be approved their plan is to develop 44 hectares of land over the next eight years.

Other well-known or upcoming industrial estates within the Moorabbin area include the new Morris Moor development and Parkview estate. 

The Morris Moor development is gaining attention within Moorabbin as it will soon be home to an array of new tenants. This development is representing the significant demand for unique office space and commercial accommodation within the Moorabbin area. With an already strong mix of tenants from start-ups and technology, to fitness and food, the development provides the staff and tenants with a well-connected, diverse location that features an array of amenities, not normally found in the surrounding industrial areas.

The already developed Parkview estate is also one of the best- known industrial estates in the entire south-east, where all the major corporates are located within pristine gardens and amenities. Unlike many industrial and business estates, Parkview provides the perfect setting and location for a number of uses,  not just corporate use.

Surrounded by key main roads such as South Road, Warrigal Road and the Nepean Highway, the demand for the industrial property sector within Moorabbin can also be linked to infrastructure developments that are currently being undertaken or are to be launched over the coming months.

The area is only expected to grow further as transport infrastructure improvements throughout the south-east will directly benefit the Moorabbin industrial scene. The new Dingley Bypass, set to be finished in 2021, will allow improved access to industrial areas in Braeside and Moorabbin. Industrial property occupiers will naturally want to locate themselves closer to easily accessible and improved roads, leading to a further decrease in vacancy rates of industrial property in those areas.

The current improvements in the south-east industrial area, which Moorabbin are a part of, are expected to transform the industrial market for developers and even investors wanting to revisit their investment strategy to move alongside any changing market dynamics. Moorabbin, while currently a strong industrial hub, is only expected to become more in demand in the future.

As government stimulus comes to an end, what is happening in the commercial property sector?

As Australians get closer to the end date for a range of government stimulus packages, speculation about what this means for the commercial property market has begun. The end of support packages such as JobKeeper, land tax reduction, and landlord assistance is assumed to lead to a wave of vacancies.

Throughout Australia, the pandemic caused a seismic shift in workplace cultures. This led to many large companies moving away from their traditional CBD office spaces, especially in Melbourne, to make way for a more flexible and modern way of working.

While state governments used a range of extra measures on top of federal stimulus packages, to support commercial real estate and its tenants throughout the pandemic, these measures are about to come to an end.

Last year was the year of the unknown, but there was a certain amount of protection that we gained from the government through these stimulus packages. Now that this is all coming to an end, it is assumed that this year will be a year of reckoning.

However, since December GDP figures were released, we saw an increase of 3.1 percent over the quarter, and an even larger increase throughout the September quarter, which was originally miscalculated. These numbers represent how quickly the Australian economy is actually moving with the previous two quarters becoming the fastest growth we have ever seen over two consecutive quarters.

Throughout the industrial and commercial real estate sectors, these figures are welcomed and celebrated as signs of perseverance through a tough time, but no matter the strength of the economy, changes within the sector are still inevitable.

It is expected that as stimulus measures ease, retail shops could end up in a similar position to many city offices, which are empty. With small businesses likely to face another tough year ahead, this could in turn trigger distressed selling in the commercial property market, which could send values plunging. This hasn’t occurred as of yet, and it is believed to have been avoided mainly due to stimulus measures.

Predictions for the commercial market short-term are sobering and those investors who are lucky enough to have kept their long-term leases signed or continuing, are likely to come out better on the other side. In fact, many are actually optimistic that commercial property will continue to move forward through this period and return to its former glory in no time.

You might be wondering why many feel so optimistic. Well, the Australian property market is deemed to remain viable long-term due to its overall strength and our low risk for any further pandemic mishaps financially due to our strong health care system. Since the market sits upon such a strong foundation, it has only been slightly damaged, not destroyed and it will eventually heal. It is a hopeful sign to still see displayed interest in the sector, despite the shift in finances that will be seen come the end of March.

Luckily for some investors, this scenario has created the perfect storm that has allowed them to jump on struggling commercial investments and purchase them from their previous owners, as they will, over-time, become a hugely profitable investment.

Mainly what commercial landlords are craving right now is the sense of stability in 2021, especially as stimulus measures end. However, just as every other sector throughout last year, some thrived and some didn’t, but we can have comfort in the fact that the predictions are, that while this year will be tough, it won’t be as tough as last year.

The strong foundation of the commercial sector means the market is appearing stronger than forecast in the lead up to the end of stimulus packages. So, despite a tough few months ahead, there is light at the end of the tunnel.

Infrastructure improvements leading the way for stronger industrial real estate in south-east suburbs

As Australia’s population continues to grow, it becomes necessary for the government to begin infrastructure growth and improvements to support the community’s needs. Rapid population growth and high population density across the east coast has underpinned the increase in land value throughout Australia’s largest capital cities; as land availability for industrial development becomes limited, and its uses restricted to other purposes if in proximity to the CBD.

Recently industrial property occupiers flocked to suburban Melbourne. Luckily for Melbourne’s industrial property market, a range of transport infrastructure improvements are under construction. Several of these infrastructure projects are currently in the works and are expected to have a significant impact on the way the Melbourne industrial market operates, re-shaping demand for industrial land.

The completion of these projects are also expected to support industrial development beyond traditional capital cities industry precincts, and into regional and suburban locations, that are in proximity to new road and rail transport infrastructure.

The Mordialloc bypass will connect the Mornington Peninsula freeway to the Dingley bypass and will help to alleviate delays and improve safety. Credit: urban.com.au

There is currently no doubt that the existing transport infrastructure investments are set to alter the outlook of the industrial market, not only for industrial operations but also for investors and developers currently revisiting their investment strategies. They will need to recognise the ever-changing market dynamics that are created by infrastructure improvements and investments.

For the industrial property industry, the latest instalment from the Victorian government of a $1 billion pipeline of road and rail projects for Melbourne’s south-east will have the largest impact. Motorists and public transport users in east and south-east Melbourne will benefit from an investment in congestion-busting infrastructure, that is set to ease traffic concerns for the rapidly growing region.

The most significant infrastructure improvements through this area, include the Monash freeway upgrade, where an extra 30kms of traffic lanes are being added to improve safety and congestion, the Thompsons Road duplication from Dandenong-Frankston Road to Berwick- Cranbourne Road and the Mordialloc bypass.

The new Mordialloc bypass will help to alleviate delays and improve safety in one of outer Melbourne’s fastest-growing areas. It will connect the Mornington Peninsula freeway to the Dingley bypass. The new arterial road that is set to be finished by late 2021, will improve access to the Dandenong South Employment and Innovation Cluster and industrial areas in Braeside and Moorabbin. Industrial property occupiers will therefore want to locate themselves as close as possible to the Mordialloc bypass. Occupiers are moving from Bayside locations to Braeside industrial market, due to flight to quality and to move closer to home.



The Braeside/Mordialloc precinct have been impacted by the Keysborough property market over the last 5 years, but now with the road network improving in this area, they are making a comeback. This comeback will be bolstered especially by the new Frasers land subdivision and speculative construction throughout the south-east suburbs. This will naturally build on an already strong industrial property market through the south suburbs.

The industrial market throughout Melbourne’s south-east will become more competitive as a result of the improvement in transport infrastructure, and occupiers flocking close to improved infrastructure.

However, the supply of industrial land throughout this south-east strip is diminishing fast, as occupiers are realising the pure value of the area. Which has led to increased prices of land and rentals and shrinking vacancy rates. The increasing strength in the market is also set to lead to a further increase in industrial property pricing, especially after an extraordinary year for Melbourne’s industrial property market in 2020.

Continued infrastructure projects and improvements from the Victorian government are only leading the way for a stronger industrial property market throughout Melbourne, during 2021 and beyond.