Squeeze on industrial space New stock is hard to come by Photo: Louise Kennerley INVESTOR appetite, limited new developments and low debt levels are driving Melbourne's historically low 3 per cent industrial vacancy rate, research suggests. A survey of 615 industrial buildings (all larger than 10,000 square metres) covering 13 million sq m of space in Melbourne's north, west and south-east shows an even lower rate, 2.5 per cent, among prime and modern buildings, according to advisory group Urbis. The low industrial vacancy rates were a "consequence of a lack of new supply that's been endemic in the market for the last five years since the GFC," Australand's industrial executive general manager Sean McMahon said. That lack was putting pressure on potential tenants, given they had fewer choices, and was applying pressure on rents, he said. Australand had built at least 100,000 sq m of speculative industrial space in key markets over the past 12 months to soak up extra demand, he said. "There has been a lot of offshore interest in buying prime industrial assets," he said. The Urbis survey found: ■Nearly half of the 13 million sq m was classified as "prime or modern" (built within the last 15 years), with 70 per cent of that space in Melbourne's west. ■Institutional owners control 35 per cent of available space, with the top five (Goodman, Australand, Dexus, Growthpoint and GPT) accounting for 3 million sq m. ■Thirty buildings were larger than 50,000 sq m, with 71 bigger than 35,000 sq m. ■The largest industrial occupier is Toll Group, with 300,000 sq m. ■About 37 per cent of space is used by manufacturers. Ford, Holden and Toyota account for 700,000 sq m, while Amcor, Visy, Caterpillar, OneSteel and CSR combined occupy a similar amount. ■Major retailers Woolworths and Wesfarmers occupy 550,000 sq m. Urbis valuation director Shane Robb said the survey identified 390,000 sq m of vacant floor space, the majority secondary stock. Rental growth for those buildings was likely to be limited but prime or modern buildings would have "greater opportunity for rental growth" within the short to medium term. Vacancy rates in the north were peaking at 5 per cent, in the west they were 2.3 per cent and in the south-east 3.8 per cent.