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Leverage Supply and Demand in Industrial Realestate

Leverage Supply and Demand in Industrial Realestate

1 May 2015 / Kosta Yankos

There is a sense of frustration in the market at present that despite enquiry levels being arguably the best they have been for a decade, getting that final signature on paper remains challenging.  To a large extent we believe this due to the fact that there is little differentiation in the market between competing assets, leading to protracted and highly competitive negotiations.  Whilst we appreciate that building design is the the outcome of market based feasibilities, we would encourage developers to be bold and to consider providing unique developments where there is strong and untapped demand.   Our advice would be to consider providing developments that appeal to the following active industry groups:

COLD STORAGE & LOGISTICS
Quality assets in this sector of the market are bullet-proof from a re-leasing perspective, and the tenant profile is typically very strong given the barriers to entry to operate in this space.  We have also witnessed significant yield compression for tenanted assets of this nature.

  • Current enquiry in this sector:  112,000 m2 (approx.)
  • Average incentive from 2008 – 2014 for prime cold storage facilities:  4% – 7%
 

ENGINEERING / MANUFACTURING

Whilst there are a number of older-style manufacturing properties for lease in the market, none offer what would be considered the ideal operational layout, truck access, and crane hook-height most companies are currently looking for. 
  • Current enquiry in this sector:  32,000 m2 (approx.)
  • Average incentive from 2008 – 2014 for prime engineering facilities:  8% – 10%
 

CONTAINER HANDLING / TRANSPORT SITES

With container volumes continuing to increase through the Port of Melbourne, demand from operators requiring 100 tonne rated container hardstand is continuing to grow.  These groups have historically occupied sites in Melbourne’s inner-west, but with constrained land supply in these precincts becoming an impediment to further development, occupiers are now considering viable options in Altona and Laverton North. 
  • Current enquiry in this sector:  65,000 m2 (approx.)
  • Average incentive from 2008 – 2014 for container handling transport facilities:  3 – 8% (typically for inner-western locations)
We encourage you to consider this strategy if you wish to avoid getting involved in war on incentives, which can be the greatest impediment at present for new development.  Bing Property Group has prepared a number of generic plans and specifications that cater to current market enquiry and we are happy to share this information with our clients upon request.
 

Should you wish to discuss this strategy or any other general enquiry please feel free to contact Nathan Bingham- details below. 

 

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