Melbourne industrial market continues its strength into 2021

Make no mistake, the Melbourne industrial property market in 2021 is hot property. 

In the first two weeks of the new year, one of the largest European retailers has locked in 81,000 square metres of Melbourne industrial space for a new distribution centre, CBRE say they expect record-breaking supply to hit Victoria, and Australia Post have announced the biggest month in Australia’s eCommerce history, led by Victoria. 

With so many investors missing out on robust investment opportunities in 2020, these good news stories for the Melbourne industrial market are the just the start of an active year ahead for VIC industrial property investors. 

Netherlands-based retailer plans 81,000 sqm distribution centre

Dutch retail giant VidaXL kicked off their new year by striking a deal with Frasers to build an 81,000-square-metre distribution centre in Melbourne’s West. This is big news for the precinct. Melbourne’s industrial market is tipped to have a knock-out year in industrial warehouse and logistics demand, triggered by the rocketing growth of eCommerce. This new facility mirrors that demand. VidaXL, an outdoor furniture and backyard goods supplier, expects to have the distribution centre completed in 2022. It will accommodate over 60,000 square metres in warehouse space with the remaining 20,000 square metres set aside for office space and awnings. Interestingly, the new world of commercial property investment (thanks to COVID-19) has meant the entire deal was conducted online. It shows – alongside many other recent deals, like our Pathway 15 Unit Trust investment – that opportunities are out there for those willing to adapt to the new environment. Some opportunities are just too good to miss.

Over 350,000 sqm needed in Melbourne industrial market to meet demand

Melbourne exited its 112-day lockdown before the new year, and the retail industry mourned the loss of many small businesses who could not stay afloat in the wake of a coronavirus second wave. With so many businesses wiped out, finding positive business news out of the second outbreak seemed as tough as finding a coronavirus vaccine. However, all one had to do was turn to the industrial and logistics sector. CBRE’s industrial and logistics director Todd Grima, who brokered the VidaXL deal, told the AFR last week that an additional 350,000 square metres of new space will be needed in Victoria each year to accommodate the massive growth in eCommerce. The new VidaXL facility will hold over 100,000 pallets of goods, to merely accommodate growing outdoor furniture demand. With the extensive number of goods available online, it’s expected more retailers will learn to adapt to the new environment by implementing online shopping to their websites, expanding into fulfilment centres in relevant logistics precincts, and meeting customers where they are: online. 

Australia Post confirms the country’s eCommerce record

November was the biggest month in Australian online shopping history, according to Australia Post’s December 2020 Online Shopping Update. Online purchases were up 20.80 per cent year-on-year, against the pre-pandemic Christmas period in 2019. As a nation, eCommerce was up 55.6 per cent year-on-year, led by Victoria and South Australia. Both states topped more than 64 per cent growth compared to the same period in 2019. Games, clothing, and fashion accessories were the top three goods bought online in November 2019, while all sales categories experienced year-on-year growth. It seems the relationship between a state’s lockdown period and its online shopping growth, as well as the general growth in eCommerce demand, is responsible for the growth. Never before have Australians been so accustomed to buying goods online. And as Australia’s baby boomers continue adapting to the online retail phenomena, we can’t expect this eCommerce record to last long in the books. 

Warehouse take-up almost one million sqm in November 2020

Was 2020 really a nothing year in retail? Not even close. COVID-19 did little to shake certain retailers according to JLL, which reported take-up of warehouse space by retailers surged to more than 800,000 square metres in the first nine months of 2020. This take-up is in line with the online sales levels, which hit a record of $41 billion in the same period. Results are not yet in, but pundits are convinced Australia surpassed its 10-year average of industrial space take-up (2.2 million square metres) in 2020. Australia’s active industrial market isn’t only good news for domestic players. Foreign money is expected to flow into Australian industrial markets as the country’s ‘safe haven’ status becomes more and more obvious for international investors. The resilience of our nation’s economy as the pandemic still startles the east coast adds further value to our already glowing credentials as a brilliant investment target for those overseas. If so, Melbourne’s industrial market will surely be the bullseye. Properties & Pathways is a commercial real estate investment business in Australia. Sign up to receive our investment updates for smarter commercial property investing in 2021.