A US private equity firm is funding speculative construction of two industrial buildings in Melbourne’s west as e-commerce ramps up demand for warehousing.
US-based Cabot Properties has commissioned two warehouses, one 17,000 square metres and the other 6000 sq m, on the last available site at Vaughan Constructions’ 4.7 hectare Wyndham Industrial Estate in Truganina.
The new Dulux factory which Vaughan Constructions is building at Merrifield.Credit:Cloud 9 Aerial Photography
The sheds will have a total end value of about $32 million. Cabot’s decided to go ahead with the two projects, its first expansion into Australia, after several years of research, the Boston-based firm’s chief investment officer Patrick Ryan said.
Vaughan’s director, Mark Byrne, said construction was on a speculative basis underpinned by the strong industrial property market.
“We would anticipate both buildings would be leased during the construction phase, if not very soon after completion, such is the level of demand.”
Mr Byrne said Vaughan had contracts on hand for $355 million industrial builds over the next 12 months. Vaughan also has the Dulux factory in Merrifield, Victoria.
The industrial building boom has prompted another developer, Sector Property Group, to buy a $7 million site in Preston on which it intends to build multiple smaller warehouses popular with owner-occupiers.
Managing director David Loakes said Sector’s The Base estates had grown in popularity with buyers wanting to own warehouses for work, storage, or investment.
“Since the start of last year we have seen a spike in interest and we have had an active pipeline of projects from Mitcham, Ringwood, Yarraville and Point Cook, which have sold out,” he said.
Sector will build multi-level storage and warehousing on the 6500 sq m site at 44 Albert Street that it purchased from Point Property Group.
Further north in Somerton, privately owned Australian mail house Melbourne Mailing has consolidated two of its sorting facilities into a central distribution centre at Somerton.
CBRE’s Daniel Eramo and Joe Brzezek negotiated Direct Mailing’s 12,600 sq m 5-year lease at 83-89 Freight Drive in a move that will consolidate its warehousing operations from Campbellfield and Fairfield.
Industrial vacancy in Melbourne’s north is at a historical low of 1.84 per cent, Mr Eramo said.
“There has been significant leasing activity in existing buildings through first quarter, with approximately 70,000 sq m of space absorbed since the start of this year,” he said.
Simon Johanson is a business journalist at The Age and The Sydney Morning Herald.
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