Melbourne’s industrial market saw a significant surge in new warehouse supply in the final quarter of 2024, with approximately 294,000 sqm of space entering the market—69.0% higher than the ten-year quarterly average. This substantial influx of new space capped off a year that marked the second-highest annual industrial completion rate in JLL’s history, following only the completion rate of 2022.
The JLL report highlighted that 62.6% of this new supply was pre-committed at practical completion, reflecting continued strong demand for industrial properties.
Key insights from the JLL report include:
Geographic Distribution of New Supply: The largest portion of new supply (37.0%) was delivered in Melbourne’s North precinct, breaking a two-year trend where the West precinct led in quarterly completions. The South East and West precincts followed with 34.0% and 29.0%, respectively.
Strong Take-up Activity: Gross take-up increased by 48.0% quarter-on-quarter to around 424,400 sqm, well above the ten-year average. The West precinct accounted for the largest share of leasing activity, contributing 56.4% of Melbourne’s gross take-up.
Sectoral Demand Trends: The Manufacturing sector was the primary driver of demand, accounting for 40.7% of total take-up, followed by the Transport, Postal & Warehousing sector, which made up 29.6%. However, the latter sector experienced subdued occupier demand in the last two quarters of 2024.
Stabilisation of Rents, Yields, and Incentives: Rents across all grades and precincts remained stable in Q4 2024, with vacancy rates beginning to affect supply-demand dynamics. Incentives held steady across most precincts, with a slight increase observed in the North.
Record Transaction Volume: The total transaction volume for Q4 2024 reached AUD 562.3 million, contributing to a record-breaking annual transaction volume of AUD 3.8 billion, the highest ever recorded by JLL in the industrial sector.
Outlook for 2025 and Beyond:
Looking ahead, Melbourne’s industrial market faces a more nuanced outlook. Of the 777,800 sqm under construction and set to complete over the next 12 months, only 47.7% has been pre-committed. This suggests an increase in vacancy rates in the short term. Developers have responded by delaying speculative projects, awaiting pre-commitments due to the high volume of completions in 2024.
While this pause in speculative development is expected to lead to a medium-term rebalancing of supply and demand, the near-term outlook suggests limited rent growth as vacancy rates rise and leasing activity stabilizes.
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