A string of industrial land deals has priced Logis Estate blocks 30 per cent higher than the rest of Dandenong South.
CBRE said a “two-tier” market has emerged, with the business park outpacing the local area.
Its Victorian industrial head, James Jorgensen said it “has managed the sale of five Logis Estate properties ranging in size from 1361 square metres to 3252 sqm over the past six months at an average price of $1841 psm, reflecting yields of sub 5.5pc”.
The average wider Dandenong South industrial land price of industrial land is $1417 per sqm, he added, based on four sales conducted over the same time.
Outside of Melbourne’s inner city, Dandenong and Dandenong South are considered the city’s most expensive industrial precincts in which to buy or rent.
Mr Jorgensen added the main driver of capital growth is lack of supply.
“In 2015, land values were at $300 per sqm and in 2018, we saw the same size blocks sell for $600 per sqm,” the broker said.
“Other forces that are driving capital values in this market are low interest rates and the fact that the industrial and logistics sector is considered a market darling amongst a range of investors – domestic, offshore, institutional and private,” according to the executive.
“Industrial land in Dandenong has now reached the point where it is only affordable for owner-occupiers and developers with low development margin expectations.
“Traditional developers are deterred by the lack of returns and are being forced to look for alternative sites, leading to the demand for brown field sites with large land components”.
Logis Estate was conceived in 2012 by then-owner, Melbourne Water, in conjunction with the state government’s Development Victoria (known at the time as Places Victoria).
Built in seven stages on 154 hectares of re-mediated land at the south-east corner of Eastlink and the Dandenong Bypass, and also with frontage to Greens Road, the master-planned business park also contains offices.
A soccer pitch, walking track, lake and retail precinct with cafes, form part of the design too.
The project required earthworks in-fill, stormwater outfall drainage and 25,000 sqm of infrastructure,
In 2013, the estate received a Premiers Design Award for “setting anew benchmark for high quality architecture, superior urban design, outstanding amenity and sustainability”.
“The developers forfeited profit by making sacrifices to the volume of land produced for sale in favour of incorporating park land and public open space beyond what was required, an element which now proves extremely popular with tenants,” Mr Jorgensen said.
“Seven years on, the original vision has been delivered and it is for these reasons that developers, investors, owner-occupiers and tenants choose this location above any others in the South East market”.
Colleagues Lachlan Ferguson, Ned Murphy and Tim Homes have been selling Logis Estate down for 10 months.
Three sites sold in the business park since February were offloaded by a single developer: Poplar Constructions Pty Ltd.
Dulux, Ego Pharmaceuticals, Hayward Pools, NSK Australia, OFE Refrigerated Transport and Shell are amongst pocket’s occupiers.