Melbourne's north has the highest industrial vacancy of any Melbourne precinct: 7.7% in Knight Frank's Q2 2026 report, up from 4.3% a year earlier, with a record 421,000 sqm of new space due to complete in 2027. For commercial property finance in Epping, Thomastown, Somerton and Campbellfield, that puts two questions at the front of a lender's mind: how long the lease has to run, and what the site is worth if the tenant leaves.
The north is warehousing, logistics, manufacturing and yard-based industrial land along the Hume corridor and the Metropolitan Ring Road. This page covers what's specific to it: the market numbers by publisher, the 2026 sales that set the evidence, the infrastructure changing the corridor, and how lenders read a short lease here. For the general approval framework (LVR, serviceability, interest cover and valuation), see our guide to commercial property finance in Melbourne. For every area we cover, see where we arrange commercial property finance.
Why do Knight Frank and Cushman & Wakefield disagree on northern Melbourne vacancy?
They measure different sets of buildings. Knight Frank counts industrial stock of 5,000 sqm and above, and put north vacancy at 7.7% in Q2 2026, up from 6.4% the quarter before and the highest of any Melbourne precinct. Cushman & Wakefield counts buildings above 3,000 sqm and reported 4.8% for Q3 2026. JLL, working from its own tracked stock, had 5.4% for Q2 2026.
None of these figures is an error. The gap is a reminder to read every vacancy number with its publisher and its size cut-off before drawing a conclusion. For a borrower, it also means a 4,000 sqm warehouse and a 20,000 sqm distribution centre in the same suburb may be read against different evidence. The table below keeps each publisher in its own column.
| Metric | Knight Frank, Q2 2026 | Cushman & Wakefield, Q3 2026 | JLL, Q2 2026 |
|---|---|---|---|
| Vacancy | 7.7% (4.3% a year earlier) | 4.8% | 5.4% |
| Prime net face rent | $145/sqm, up 3.0% on the year | $146/sqm | Not found |
| Incentive | 21.7%, effective rent flat at $114/sqm | 20.9% | Not found |
| Yield | 6.25% prime, 6.75% secondary | 5.93% average prime | Not found |
| Industrial land | $900 small, $630 medium, $250 large lots, per sqm | $750/sqm for 1 to 5 ha | Not found |
| Prime capital value | $2,320/sqm | $2,468/sqm | Not found |
| Take-up | 219,526 sqm in the first half of 2026 | 232,359 sqm year to date | Not found |
What does a record 421,000 sqm of 2027 supply mean for a Thomastown or Epping lease expiry?
The north's new supply arrives in one lump. Knight Frank expects just 66,000 sqm of new space in 2026, the lowest since 2019, followed by a record 421,000 sqm in 2027. Part of that jump is timing: Amazon's Craigieburn fulfilment centre, about 209,000 sqm, has been delayed 12 months. Knight Frank also lists speculative space planned for 2027 at 4-Ten Epping, the MIIX Estate and the Somerton Logistics Estate, which means buildings finished before a tenant has signed.
Rents point the same way. Knight Frank's prime net face rent in the north rose 3.0% over the year to $145/sqm, yet incentives of 21.7% held effective rent flat at $114/sqm. When a lease in the north ends in 2027 or 2028, the tenant can weigh a renewal against a large amount of new, empty space nearby, and a lender assessing that lease will apply the same context. A lease expiring into a quiet supply year reads differently from one expiring into a record one.
If your lease expiry falls in that window, the useful work happens before the loan application: an extension signed early, an option exercised, or written evidence of the tenant's plans for the site. Compare the north with industrial property finance in Melbourne's west, where Knight Frank puts incentives higher at 26.1%, and with commercial property finance in Dandenong and the south-east, where Cushman & Wakefield places much of the vacancy in the growth estates.
How did a Thomastown site with about 10% site coverage sell at 5.58%?
121 Trawalla Avenue, Thomastown, about 15 km north of the CBD, sold for $19.0 million in September 2026. The 3.88 ha site holds a 4,047 sqm warehouse, so the building covers about 10% of the site by our arithmetic. The selling agent at Colliers contrasts that with about 65% coverage on a typical modern industrial property (realcommercial, 7 Sep 2026). The tenant runs a logistics yard supporting construction of the North East Link and pays net rent of $1,060,900 a year, a 5.58% passing yield, with about 18 months left on the lease at the sale (realestatesource, Sep 2026). The site last changed hands for $15.15 million in January 2023.
A buyer accepting 5.58% on a short lease is paying largely for land. The agent noted that large, lightly built sites are increasingly hard to find in the established north, and that the new owner could keep the tenant, subdivide, or build more warehousing, subject to council approval.
For a lender, a property like this splits into two questions. The rent answers serviceability while the lease runs. The land answers what the security is worth if the tenant goes. We've covered how an investor and an owner-occupier would each be assessed on this same sale in one Melbourne warehouse, two ways to finance it, so here the focus is the land. Valuers in this position lean on land sales. Knight Frank's Q2 2026 north figures put small lots at about $900/sqm, medium lots at $630/sqm and large lots at $250/sqm, while Cushman & Wakefield puts 1 to 5 ha lots at $750/sqm. By our arithmetic, $19.0 million across 38,817 sqm is about $490 per sqm of land with the building included.
What is planned at Epping's O'Herns Logistics Park and the Beveridge intermodal precinct?
Two large projects sit behind the north's long-run story. In February 2026, Yale Investment Group bought 25 Vearings Road, Epping, a 260 ha site in the O'Herns Logistics Park, for $275 million, with a masterplan for about 700,000 sqm of warehousing and logistics (The Urban Developer, 5 Feb 2026). Further north, the Beveridge Intermodal Precinct covers 900 ha, about 400 ha of it developable. It's a $1.62 billion Commonwealth project, and National Intermodal is targeting Stage 1 operations, with capacity of up to 200,000 TEU a year, for mid-2028. Closer to the city, the privately operated Somerton Intermodal Terminal was reported at about $400 million (Grain Central, June 2024).
Projects that haven't opened shape where occupiers want to be, and they matter for a buyer's long-term view of Epping, Somerton and the corridor beyond. A valuation written in 2026, though, works from sales and leases already signed. Treat Beveridge and O'Herns as part of the same supply and demand picture described above, with the new space they bring arriving alongside the 2027 pipeline.
What do lenders weigh in Thomastown, Epping and Somerton?
Thomastown, low site coverage
Older industrial land close to the Metropolitan Ring Road. Where buildings cover a small share of the site, land value carries much of the valuation, and alternate use or subdivision, subject to council, becomes part of the lender's view of the security.
Epping and Somerton estates
New and speculative stock at 4-Ten Epping, MIIX and the Somerton Logistics Estate. Lenders look at the tenant's covenant, the incentive behind the face rent, and how much competing space completes nearby in the same year.
Multi-tenant estates
Several leases spread the risk of a tenant leaving into rising vacancy, while several smaller tenants each carry less covenant weight than one national occupier. The tenancy schedule gets read line by line.
Yard and outdoor storage sites
Transport depots and outdoor storage yards with modest buildings, like the Thomastown sale's own use, are valued mostly on land. Knight Frank's north land range, $250/sqm for large lots to $900/sqm for small ones, shows how much lot size moves that base.
Owner-occupiers in the north
A business buying the warehouse or factory it trades from is assessed mainly on its own trading profit, so the north's vacancy rate weighs less on the loan than the business accounts do. Vacancy still matters to the valuation, because the valuer asks what the building would let for if the business ever moved out.
How do lenders treat a northern Melbourne warehouse with under two years left on the lease?
A short lease changes which questions a lender asks first. With seven or more years to run, a lender can lean on the rent. With 18 months left, the rent covers the loan only until the expiry date, and the lender has to form a view on what happens after it. In the north in 2026, that view is formed against 7.7% vacancy on Knight Frank's measure and a record 2027 pipeline. Our article on why banks decline commercial property loans covers short leases as one of the common reasons; here is how the arithmetic shifts in this corridor.
The same northern Melbourne warehouse, with seven years and with 18 months left on the lease
A fictional northern Melbourne warehouse is bought for $6.0 million at an illustrative 6.25% yield, so it earns $375,000 a year in net rent. We use the same illustrative assumptions as our other commercial guides: a 7.23% interest rate and 1.5 times interest cover.
With seven years left, the rent can carry $250,000 of interest a year ($375,000 divided by 1.5). At 7.23%, that supports a loan of about $3.46 million, about 57.6% of the price. Here the rent sets the loan.
With 18 months left, the arithmetic is identical on paper and the credit question is different. Expect the lender to ask:
- How long would the building take to re-let in a precinct at 7.7% vacancy (Knight Frank, Q2 2026), with a record 421,000 sqm completing in 2027?
- What incentive would a new tenant need, when north incentives of 21.7% already hold effective rent flat at $114/sqm?
- What is the land worth without the building's income, measured against north land values of $250 to $900/sqm depending on lot size?
- Has the tenant shown any intention to renew, and can an extension be signed before settlement?
The answers can lead to a lower loan, a shorter term, a condition that the lease is extended before drawdown, or a lender from a different tier. We haven't put a number on that adjustment, because it depends on the lender, the asset and the borrower.
Illustrative only. Rates, LVRs and cover ratios vary by lender, asset and borrower.
If you're looking at a northern Melbourne property with less than two years left on the lease, get in touch before you sign, so the lender's questions are answered in the application rather than after the valuation. If a lease expiry is approaching on a property you already own, our guide to refinancing commercial property when your term ends covers the timing.
Are multi-tenant industrial estates in Epping easier or harder to finance?
In August 2026, a 4.68 ha estate across Dream Haven Court and Miller Street, Epping, came to market with a price guide in the mid-$40 millions. Six tenants pay more than $2.68 million a year across 26,019 sqm of buildings on four titles, and the agents reported enquiry from institutional, private, interstate and Asia-based buyers (realcommercial, 6 Aug 2026). At a $45 million price, that rent would be a yield of roughly 6%; that's our arithmetic, not a reported figure.
A lender reads an estate like this differently from a single-tenant warehouse. Six leases rarely all end in the same year, so one departure removes a slice of the income rather than all of it, which counts for more in a precinct where vacancy has risen from 4.3% to 7.7% in a year on Knight Frank's figures. The trade-off is covenant: six smaller businesses each carry less weight than one national occupier, so the tenancy schedule (who pays what, until when, with what increases) is read line by line. Four separate titles can also matter to how the security is structured and, later, to how the estate could be sold.
Questions about industrial loans in Epping and Thomastown
Is northern Melbourne industrial vacancy really 7.7%?
It depends on the publisher. Knight Frank reported 7.7% for Q2 2026, counting buildings of 5,000 sqm and above, while Cushman & Wakefield reported 4.8% for Q3 2026 on buildings above 3,000 sqm, and JLL reported 5.4% for Q2 2026. Read each figure with its size cut-off, then compare it with the size of the building you're financing.
Will a bank lend on a Thomastown warehouse with a short lease?
Often yes, but the loan is sized on what happens after the lease ends as well as on today's rent. A Thomastown site sold for $19.0 million in September 2026 with about 18 months left on its lease. Expect questions about re-letting time, incentives and land value, and gather any renewal evidence before you apply.
How does the Beveridge intermodal precinct affect property in Epping and Somerton?
Mostly over the longer term. National Intermodal is targeting Stage 1 operations at the $1.62 billion Beveridge precinct for mid-2028, with capacity of up to 200,000 TEU a year. Valuers work from sales and leases already signed, so treat Beveridge as a demand story for the corridor and base a 2026 loan on today's evidence.
Can I borrow against the land value of a low site coverage industrial property?
Yes, and on a lightly built site the land often carries most of the valuation. The Thomastown sale in September 2026 had a 4,047 sqm warehouse on a 3.88 ha site, about 10% coverage, against about 65% for a typical modern property. Valuers lean on land sales, which Knight Frank puts at $250 to $900 per sqm in the north, so bring any planning work you have.
What yield are northern Melbourne warehouses selling at?
Market reports put prime northern Melbourne industrial yields at 5.93% (Cushman & Wakefield, Q3 2026) and 6.25%, with secondary stock at 6.75% (Knight Frank, Q2 2026). A land-rich Thomastown site sold at 5.58% in September 2026. Use the yield to test how much debt the rent can service before you settle on a price.
Sources: Knight Frank, Melbourne Industrial State of the Market Q2 2026; Cushman & Wakefield, Melbourne Logistics & Industrial MarketBeat Q3 2026; JLL, Q2 2026 Australian Industrial Market Analysis (17 Aug 2026); realcommercial.com.au (6 Aug 2026 and 7 Sep 2026); realestatesource.com.au (Sep 2026); The Urban Developer (5 Feb 2026); National Intermodal, Beveridge (accessed 6 Oct 2026); Grain Central (3 Jun 2024). Market figures are third-party commentary, not FGO or lender policy.