Leasing activity rebounds

• Gross take-up increased by 138.9% q-o-q to 362,450 sqm in the quarter. This was 32.0% above the ten-year quarterly average. The West precinct accounted for the largest portion of quarterly leasing activity, with 55.5% of Melbourne’s gross take-up.
• The Manufacturing sector accounted for the largest portion of quarterly take-up in the Melbourne market (38.5%). This was followed by the transport, postal and warehousing sectors at 32.0%, then private/undisclosed with 15.4%.

Supply levels surge

• Supply increased significantly over the quarter, with 555,853 sqm of completions brought to market, 233.7% above the ten-year quarterly average. Of the supply, 75.3% was pre-committed at practical completion.
• The largest portion of quarterly supply for the Melbourne market was delivered in the West precinct (59.6%). This was followed by the North precinct, which accounted for 32.9%, and then the South East precinct for the remaining 7.5%.

Rent growth is mixed across precincts

• In Q2, rent growth in the West and North precincts was subdued due to increased completions and rising vacancies. Incentives increased across all grades. Conversely, the South-east precinct saw a significant 8.8% rent increase due to tight vacancy.
• Melbourne’s industrial transaction volume totalled AUD 1.3 billion over the quarter. Two major portfolio sales accounted for 55.3% of this total. The Q2 quarterly volume was 156.1% above the ten-year quarterly average.

Outlook: A more nuanced market

• With only 34.1% of the 776,382 sqm under construction in 2024 (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.