Derrimut Vic warehouse redevelopment provides 42% re-leasing spread

Our in-house development team recently completed a nine-month redevelopment of Centuria Industrial REIT’s (ASX:CIP) industrial facility at 30 Fulton Drive, Derrimut Vic, expanding the original c.10,600 sqm warehouse with a 2,700 sqm extension, while adding a 35m super awning, eight additional roller doors, a new c.4,000 sqm hardstand, two new recessed docks, new solar/skylights and EV chargers.

As a result of the redevelopment, the asset has been fully leased on a five-year term, securing a 42% re-leasing spread to the prior accommodation.

The project is indicative of our funds management and development teams working in unison to deliver added value to our assets and, ultimately, better value to our REIT’s unitholders.

The property is located in the heart of Derrimut, a key Melbourne industrial precinct that is highly sought after due to its proximity to the CBD (17km), airport (19km) and Port of Melbourne (18km). The area is highly connective with access to key road arterials, meaning strong tenant demand has limited the area’s vacancy to c.3%.

CIP is a major landlord within Derrimut with an 86,400 sqm landholding. Blue-chip major tenants in the precinct include Woolworths, Tesla, Beacon Lighting and United Rentals.

Grant Nichols, CIP Fund Manager and Centuria Head of Listed Funds, said, “Derrimut is a prime urban infill industrial precinct due to its proximity to densely populated areas, limited industrial land supply, and persistent high occupier demand. This was a rare opportunity to harness these strong market tailwinds by delivering an enhanced industrial facility that has generated a stronger income for the REIT.”

Acquired by CIP in 2021, the 35-year-old warehouse now provides improved overall efficiency, increased lettable area, significantly enhanced amenities and various sustainable features.

Though redevelopments cannot qualify for a Green-star status, the project has delivered considerable sustainability features, including:

• 92% of materials were recycled through the retention of the existing structure and extensive reuse of steel, concrete, roofing, timber and hardstand materials, significantly reducing waste and embodied carbon
• A 99kW solar system installation, with the roof structure designed to support 400kW immediately and up to 700kW in future
• 10% translucent roof sheeting, which improves natural light and reduces energy use
• Two rainwater tanks providing 25,000L storage for non-potable reuse
• Seven newly installed EV chargers and infrastructure to convert 25% of the carpark to EV bays
• Undercover bicycle parking with e-bike charging and motion activated lighting.

Other key redeveloped features include:

• New office accommodation with fully upgraded mechanical and hydraulic services
• State-of-the-art end-of-trip facilities.

Andre Bali, Centuria Head of Development, said, “The Derrimut redevelopment is indicative of how our inhouse development team can enhance the performance of our existing portfolio. Australia’s domestic infill industrial market is extremely constrained meaning there are not enough warehouses to meet burgeoning demand from occupiers in locations where we have an existing landholdings.

“This demand is driven from a growing population, increased ecommerce and, to some extent, continued onshoring of supply chains. Despite rising construction costs, redevelopments such as 30 Fulton Drive demonstrate the commercial value-add that can be extracted from our portfolios.”

According to Cushman & Wakefield Research (Australian Market Overview – Logistics and Industrial) Australia’s national infill industrial market vacancy is 2.4% which is considerably below the non-infill vacancy rate of 4.0%.