Take-up returns to long-term average

• Gross take-up decreased by 18.5% q-o-q to 295,200 sqm. This was 5.18% above the ten-year quarterly average. The West precinct accounted for the largest portion of quarterly leasing activity, with 36.3% of Melbourne’s gross take-up.
• The transport, postal and warehousing sectors saw a figure 22% below the five-year quarterly average. 3PLs are consolidating their warehouse spaces, as evidenced by only five occupier moves by the sector in the quarter, all over 10,000 sqm.

Project delays bring subdued supply results

• New to the market in the quarter was 147,000 sqm of warehouse space, 13.5% less than the ten-year quarterly average. Of the supply, 100% was pre-committed at practical completion. Project delays have pushed several projects to Q4 with 518,000 sqm set to complete.
• The largest portion of quarterly supply for the Melbourne market was delivered in the West precinct (62.8%). This was followed by the North precinct, which accounted for 26.4%, and then the South East precinct for the remaining 10.8%.

Rents, yields and incentives stabilise

• In Q3, rents across all grades and precincts remained stable as we continue to see rising vacancy levels affect supply-demand dynamics. Incentives also remained stable in all precincts except the North, which saw a small increase.
• Melbourne’s industrial transaction volume totalled AUD 1.1 billion over the quarter. One major sale accounted for 54.8% of this total. The Q3 quarterly volume was 106.8% above the ten-year quarterly average.

Outlook: A more nuanced market

• With only 35.7% of the 921,000 sqm under construction and set to complete in the next 12 months (in Melbourne) being pre-committed, an increase in vacancy rates is anticipated, albeit from a very low base.
• Rent growth in all precincts is likely to slow down over the remainder of the year as the market absorbs the record annual supply received in 2024.