July 2026 :: OneCom News
Institutional Capital Returns to Victoria's Industrial Market
Melbourne's 50-basis-point yield premium over Sydney is drawing offshore-backed funds back after a two-year absence.
Melbourne's industrial property market is attracting institutional capital for the first time in more than two years, with offshore-backed investment groups reassessing Victoria as a pricing opportunity rather than a market to avoid.
The shift follows a prolonged period in which many institutional investors excluded Victorian assets from their mandates after the state government's land tax increases took effect. Melbourne industrial yields now sit approximately 50 basis points softer than comparable assets in Sydney and Brisbane - a spread that is increasingly outweighing the additional holding cost.
The clearest evidence of the reversal came last month when Hale Capital Partners, backed by global heavyweights Warburg Pincus and Oxford Properties, acquired Scoresby Industry Park for a reported 20 million - one of the largest Victorian industrial transactions in recent years and widely viewed by market participants as a signal that large-scale institutional capital is once again prepared to commit to the state.
"For the better part of two years, most institutional groups with offshore capital simply would not consider Victorian industrial assets. That position is changing. The conversation has changed materially." - Joshua Charles, Managing Director
Of five institutional buyer groups that met with One Commercial during the past week, three expressed active interest in Victorian opportunities and two are currently pursuing acquisitions in the state. None of those groups were actively considering Victorian industrial investments only months earlier.
The renewed demand is concentrated in assets valued between 0 million and 00 million, driven predominantly by Australian institutions managing or deploying offshore capital. Investors are finding it increasingly difficult to deploy capital in Sydney and Brisbane, where available stock has tightened considerably.
"Many investors now view the additional land tax burden as a cost that can be quantified and priced into an acquisition rather than a reason to exclude Victoria altogether. Melbourne is moving back onto acquisition shortlists." - John Stinson, Senior Director - Capital Markets
Election Factor Adding Upside Optionality
Beyond the yield arithmetic, some institutional investors are factoring in the prospect of a change of government at the 28 November 2026 state election - the first potential change in more than a decade.
Wagering markets reflect genuine uncertainty. Sportsbet currently has the Liberal-National Coalition at .45 to form government, with Labor at .37. A change in Victoria means a real conversation about land tax reform. Recent polling shows the Coalition leading on both primary vote and two-party-preferred, with Premier Jacinta Allan's government seeking a fourth consecutive term against Opposition Leader Jess Wilson.
"Politics is not the primary driver of investment decisions, but investors are paying close attention to the policy environment and what a change of government could mean for the business and tax settings that have weighed on Victorian investment. For some groups, a potential Coalition government represents upside optionality that is adding to the attraction of entering the market now, ahead of stronger competition." - Joshua Charles, Managing Director
Outlook
One Commercial expects buyer demand for Victorian industrial property to continue strengthening throughout the second half of 2026, with the possibility that demand could return to pre-2023 levels within six months.
"The pricing differential remains attractive. Occupiers are responding to a lower cost rental proposition expanding demand. Both factors are driving positive sentiment for the state. Capital sitting patiently on the sidelines is seeing opportunities to secure assets before competition becomes materially stronger."
