Industrial property finance in Melbourne's west is sized on effective rent more than on the headline figures. The west is Melbourne's largest industrial market by take-up, with 559,810 sqm leased in the year to date (Cushman & Wakefield, Q3 2026). Knight Frank puts west vacancy at 5.7% against a ten-year average of 3.1% (Q2 2026), with incentives as high as 30.0 to 32.5% in select suburbs. For a lender, the gap between face rent and effective rent is the number that decides the loan here.
This page covers the precincts the property publishers group as the west: Truganina, Derrimut, Laverton North and Ravenhall. Each figure below names its publisher and quarter, because the three main research houses measure different stock and their numbers don't line up. The approval framework that applies to any Melbourne property, from LVR and serviceability to how valuations work, sits on our Melbourne commercial property finance page, and the other markets we cover are listed on where we arrange commercial property finance. FGO is a Melbourne broker that arranges finance for western industrial property through bank, challenger and private lenders.
Why is west Melbourne vacancy rising while it still leads Melbourne for take-up?
Both things are true at once, and the three publishers agree on the direction even where the levels differ. Cushman & Wakefield counts buildings above 3,000 sqm and puts west vacancy at 4.7% in Q3 2026. JLL's Q2 2026 figure is 5.4%. Knight Frank, which counts buildings of 5,000 sqm and above, has it at 5.7%, up from 3.3% a year earlier.
| West industrial | Cushman & Wakefield, Q3 2026 | Knight Frank, Q2 2026 | JLL, Q2 2026 |
|---|---|---|---|
| Vacancy | 4.7% | 5.7% (3.3% a year earlier; ten-year average 3.1%) | 5.4% |
| Prime net face rent | $157/sqm | $141/sqm, up 2.8% a year | Not published |
| Incentive | 24.2% | 26.1% (30.0 to 32.5% in select suburbs) | Not published |
| Yield | 5.80% prime average | 6.13% prime, 6.88% secondary | Not published |
| Land value | $833/sqm (1 to 5 ha) | $845 small, $630 medium, $400 large lots, per sqm | Not published |
| Take-up | 559,810 sqm year to date | 376,718 sqm in the first half; 619,000 sqm over 12 months | Not published |
| New supply, 2026 | Not published | 222,000 sqm, against a 414,000 sqm ten-year average | Not published |
Take-up still leads the city. Cushman's 559,810 sqm for the west is almost half of the 1,132,203 sqm leased across all of Melbourne's prime industrial market this year. Some of that is fresh demand: Cushman reports that Dollarama committed to about 25,000 sqm at Derrimut in Q3 2026, which it describes as "an entirely expansionary requirement". Vacancy rises anyway because tenants now have more space to choose from. Cushman's explanation for the Melbourne-wide rise is speculative stock completing without a tenant. New supply in the west is slowing: Knight Frank expects 222,000 sqm in 2026, about half the 414,000 sqm ten-year average.
For a borrower, rising vacancy alongside strong take-up means the tenant in your building has options when its lease ends. A valuer will ask how long the space would take to re-let and on what incentive, and a lender reads that answer straight into the loan.
What does a lender weigh in Truganina, Derrimut, Laverton North and Ravenhall?
The west isn't one market to a lender. These are the factors that tend to carry the most weight in each part of it.
Truganina and Ravenhall estates
The City of Melton's 2024 land strategy describes Ravenhall and Truganina as contemporary business parks supporting over 10,500 jobs. These are newer, larger-format estates, so the tenant's covenant and the length of its lease drive the loan more than the building does.
Derrimut established logistics
Derrimut has both recent leasing and recent sales on record: Dollarama's 25,000 sqm commitment and the $52.5m sale of 18 Foxley Court in Q3 2026 (Cushman & Wakefield). Fresh evidence gives a valuer more to test the price against.
Laverton North older buildings
Knight Frank's 6.88% secondary yield for the west is the benchmark for older stock like much of Laverton North's. Lenders look at clearance height, hardstand and site coverage, because those decide how quickly the building would re-let. Low site coverage can shift the valuation toward the land.
Land and pre-lease deals
Lenders generally lend less against vacant land than against a leased building, and they'll want to see how the loan is serviced before rent starts. A signed pre-lease with a creditworthy tenant usually improves the terms.
Data-centre-adjacent land
Cushman & Wakefield notes that data-centre demand supports higher land values in some western precincts (Q3 2026). A valuer still needs sales evidence for the use the land is zoned and approved for, so any premium in the price that the valuation doesn't support comes out of your equity.
How do 30% incentives change what a Truganina warehouse is worth to a lender?
An incentive is what a landlord gives a tenant to sign: months without rent, a fit-out contribution, or both. Research houses express it as a share of the total rent over the lease. Knight Frank's 26.1% average for the west in Q2 2026 means that, across a typical new lease, about a quarter of the face rent goes back to the tenant. In the select suburbs where it reaches 30.0 to 32.5%, close to a third does.
The lease still shows the face rent, and a buyer's yield is usually quoted on it. A valuer works from effective rent, what the landlord keeps after the incentive, and capitalises that. So a warehouse leased at a high incentive can carry a passing yield that looks healthy while its valuation, and the rent a lender counts, sits lower. The example below shows how the loan is set before any incentive is considered.
| Purchase price | $4,000,000 |
| Passing yield (illustrative, Knight Frank's Q2 2026 west prime yield) | 6.13%, or $245,200 net rent a year |
| Interest rate and cover (illustrative) | 7.23%, with rent required to cover interest 1.5 times |
| Interest the rent can carry | $245,200 divided by 1.5 = about $163,500 a year |
| Loan the rent supports | $163,500 divided by 7.23% = about $2.26m, or 56.5% of the price |
| Loan at an illustrative 65% LVR cap | $2.60m |
The rent sets this loan at about $2.26m, well below the LVR cap. Now suppose that $245,200 was agreed on a new lease with a large incentive. The valuer works from the lower effective rent, which lowers the valuation and the income the lender counts, so both tests tighten and the loan falls further. How far depends on the incentive and the valuer's view, so we haven't put a number on it.
Illustrative only. Rates, LVRs and cover ratios vary by lender, asset and borrower.
The same 7.23% rate and 1.5 times cover are used in our comparison of commercial property yields by city, so the numbers line up across the site. If you'd like a real lease tested against both limits, get in touch.
What has sold in Derrimut, Truganina and Laverton North in 2026?
Four dated sales give a sense of the range, from a $180m development landholding to a $4.62m single-tenant investment.
| Property | Price | What sold | Reported by |
|---|---|---|---|
| 725 Boundary Road, Truganina | $180m | Development landholding of almost 59 ha (35.8 ha zoned industrial, 5.5 ha residential), bought by Citius Group with Stamford Capital Investment Management; sold through Colliers | The Urban Developer, 4 May 2026 |
| 18 Foxley Court, Derrimut | $52.5m | Bought by ESR-REIT from Centuria | Cushman & Wakefield, Q3 2026 |
| 185 Leakes Road, Truganina | $36.6m | Development land, off-market, bought by Al Jasser Group and settled in 10 days; adjoins Amazon's future data centre | commercialrealestate.com.au, 23 Feb 2026 |
| Factory 3, 5-7 Maria Street, Laverton North | $4.62m | 1,025 sqm building on a 6,843 sqm site (about 15% site coverage) in the Industrial 2 Zone, leased to Cleanaway at $237,853 net a year; sold through Knight Frank | propertymarkets.news, 27 Jul 2026 |
The Maria Street sale is the most useful for a smaller buyer. Its net rent is about 5.1% of the price, below Knight Frank's 6.13% prime average for the west, and the agent's own commentary credits the low site coverage and concrete hardstand. In other words, the buyer paid for land and flexibility as well as income. On the same illustrative 7.23% rate and 1.5 times cover, that rent supports about $2.19m, or about 47.5% of the price, so a buyer of a low-coverage site like this should expect to bring more equity than the yield alone suggests. The Industrial 2 Zone it sits in is explained in the zone primer on our where we lend page.
What does the deferred Western Interstate Freight Terminal mean for Truganina land?
In June 2024 the Victorian Government shelved plans to build the Western Interstate Freight Terminal at Truganina first, choosing Beveridge in Melbourne's north instead, while committing to protect the Truganina land (Grain Central, 3 June 2024). Its December 2024 fact sheet says the Truganina terminal "should be developed when more capacity is needed and become the larger operation", with land protected through the Chartwell East precinct structure plan area.
For a lender, a terminal with no build date is a long-dated possibility. Valuers price land and buildings on current sales and approved uses, so any uplift a buyer expects from a future terminal is the buyer's own bet and is funded from equity. The City of Melton's 2024 strategy names the terminal as a strategic focus for the area, which supports the long-run case for western logistics land without changing what a lender will lend today. The Beveridge side of this story is covered on our commercial property finance in Epping and Thomastown page.
Why is the gap between prime and secondary yields widest in the west?
Knight Frank's Q2 2026 figures put the west's prime yield at 6.13% and its secondary yield at 6.88%. That 0.75 percentage point gap is the widest of any Melbourne precinct Knight Frank reports, where the gap elsewhere is 0.50 points or less, and 6.88% is the highest secondary yield in the city. Cushman & Wakefield's prime average for the west is lower again at 5.80% (Q3 2026).
Knight Frank doesn't give a reason. The pattern is consistent with a market where tenants have choice: when new Truganina space comes with incentives near 30%, an older Laverton North building with lower clearance competes for the same tenants, and buyers want more income to take that risk. A higher secondary yield means more rent per dollar of price, which can help the interest cover test, but a lender will usually match it with closer questions on the building's age, capital works and re-letting time. Those are the points that most often trip up an application, as our article on why banks decline commercial property loans sets out.
Are data centres changing land values in the west?
In parts of it, yes. Cushman & Wakefield's Q3 2026 report says data-centre demand supports higher land values in some western precincts. The clearest local marker is 185 Leakes Road, Truganina, which adjoins Amazon's future data centre and sold for $36.6m in February 2026. The buyer, Al Jasser Group, already owns the adjoining 100 Palmer Road site (commercialrealestate.com.au, Feb 2026). The $180m sale of the almost 59 ha 725 Boundary Road landholding in May 2026 is the other marker: the buyers expect to propose logistics and data centres alongside a residential component (The Urban Developer, 4 May 2026).
Land values are already high across the west. Knight Frank's large-lot rate of $400/sqm for the west is the highest it reports for any Melbourne precinct (Q2 2026), and Cushman puts 1 to 5 hectare lots at $833/sqm. Cushman also notes that Melbourne land values for 1 to 5 hectare lots are approximately double their early-2020 levels. For a land loan, the lender lends against the valuation, and the valuer relies on sales of land with the same zoning and approvals. If you're paying a data-centre premium for land zoned and approved for warehousing, expect the gap between price and valuation to come from your own funds.
Questions about financing industrial property in the west
Why are incentives so high on west Melbourne warehouses?
Because tenants in the west have choice. Knight Frank puts west vacancy at 5.7% in Q2 2026, up from 3.3% a year earlier, with incentives averaging 26.1% and reaching 30.0 to 32.5% in select suburbs. If you're buying a recently leased warehouse, ask the agent what incentive was given on the current lease before you bid.
Is it harder to finance an older Laverton North warehouse than a new Truganina one?
It can be, because lenders price age and re-letting risk. Knight Frank's Q2 2026 secondary yield for the west is 6.88% against 6.13% for prime, the widest gap in Melbourne. A lender will look closely at clearance, hardstand, site coverage and lease length, so have the building details and lease ready before you apply.
Can I borrow to buy industrial land in Truganina before a tenant is signed?
Yes, though lenders generally lend less against vacant land than against a leased building, and they'll assess how you'll service the loan without rent. Knight Frank puts medium-sized west lots at $630/sqm in Q2 2026. A signed pre-lease or other income usually improves the terms, so bring your development and leasing plan to the first conversation.
Does the Western Interstate Freight Terminal deferral affect Truganina property values?
Not directly in a valuation, because valuers work from current sales and approved uses. The Victorian Government deferred the terminal in favour of Beveridge in June 2024 and committed to protecting the Truganina land, according to Grain Central. Treat any terminal uplift as upside you fund with your own equity.
How much can I borrow against a leased Derrimut warehouse?
Usually the lower of what the rent supports and the lender's LVR cap. At an illustrative 6.13% yield, 7.23% rate and 1.5 times interest cover, a $4.0m west Melbourne warehouse's rent supports about $2.26m, or 56.5% of the price, below a 65% cap. Send us the lease and rent schedule and we'll run both tests.
Sources
- Cushman & Wakefield, Melbourne Logistics and Industrial MarketBeat, Q3 2026
- Knight Frank, Melbourne Industrial State of the Market, Q2 2026
- JLL, Q2 2026 Australian Industrial Market Analysis, 17 August 2026
- City of Melton, Employment and Industrial Land Strategy, 24 June 2024
- Grain Central, Victorian Govt shelves Truganina terminal plans, 3 June 2024; Victorian Government, interstate freight precincts fact sheet, 13 December 2024
- commercialrealestate.com.au, 185 Leakes Road sale, 23 February 2026; The Urban Developer, 725 Boundary Road sale, 4 May 2026; propertymarkets.news, 5-7 Maria Street sale, 27 July 2026
Yields, vacancy and rents are market commentary from the named publishers. They aren't FGO or lender policy.