Industrial property generally a stable investment

The market for industrial property in Melbourne has remained strong over the past 12 months – enjoying a solid demand from tenants, owner occupiers and potential investors alike.

According to Savills Australia, leasing activity for the twelve months to June 30 this year was up by more than 7% on the five-year average for Melbourne.

The dominant tenants clearly came from the retail and logistics sectors — with more than 740,000 square metres being leased. And of that amount, just over 200,000 square metres was by way of pre-commitment.

And according to recent research by Colliers International, the current level of rentals and capital values showed increases of between 5% and 18% across the metropolitan area during the last financial year.

Each of the suburban markets is poised to firm further by the end of the year due to a shortage in supply of quality stock and very little development activity currently occurring.

As such, this will only serve to put more upward pressure upon rentals and also cause a marked decrease in any incentives being offered.

Bottom Line: Generally, industrial property will offer you a better return than you'll receive from either retail or offices. But you need to remember that, unlike offices, industrial property’s ongoing fortunes are tied more to the retail sector than the general economy.

Chris Lang is an advisor to commercial property investors and gives keynote speeches and regular seminars on the best way to invest in commercial property. He maintains a blog, his-best.biz, which he updates regularly about the best way to get the most out of your commercial property investment.