ESR Australia has kicked off development of a logistics project occupying a 79 hectare (195 acre) site in suburban Melbourne and secured France-based CEVA Logistics as an anchor tenant, according to its top official.
Best known as the shipping provider for Ferrari’s racing division, CEVA has agreed to lease 37,000 square metres (398,265 square feet) out of an estimated 230,000 square metres of floor area in ESR Green Link Estate for a 10-year term, Phil Pearce, chief executive of ESR Australia told Mingtiandi on Monday confirming news first reported by The Australian Financial Review.
“We’re very pleased to have CEVA, and I think it’s a vindication for our strategy around the estate because it is going to be a 6-star Green Star facility that we’re building for CEVA, which was obviously very important for them — the sustainability features that we’re incorporating,” said Pearce. “In addition to that, it’s a vindication in terms of the location of the site and the long term outlook for the area.”
The project is part of a broader A$1 billion ($720 million) develop-to-hold logistics partnership between ESR and Singapore’s GIC launched in June 2020 as the Hong Kong-based giant continues to expand its Aussie holdings.
First Tenant Secured
CEVA will be occupying 16 percent of the A$700 million logistics hub at 590 and 620 Western Port Highway in Cranbourne West, southeast of Melbourne, where the property giant is planning to build 8 to 10 warehouses.
When ESR bought the site on behalf of its ESR Australia Development Partnership fund with GIC in July 2020, the firm said it aims to service southeast Melbourne’s growing population of affluent citizens as the country experiences an e-commerce boom. The project also benefits from access to major roads such as the Monash Freeway heading into Melbourne, as well as the Eastlink toll road which feeds into the eastern suburbs.
With earthworks and civil works ongoing for the project, Pearce said CEVA is scheduled to transfer to its new location by the third quarter of 2023, where it will settle into facilities built to some of the highest sustainability standards in the country.
ESR is shooting for a 6-Star rating under the Australian Green Building Council’s Green Star rating system for sustainable buildings for Green Link Estate, which requires that the facility achieve carbon net zero operationally and use renewable energy.
Pearce said ESR continues to discuss possible leases with other logistics firms as well as with end users looking for warehouse space in the area.
For CEVA — which is a subsidiary of $31.5-billion French shipping giant CMA CGM Group — the logistics provider is planning to use its new location to consolidate its existing Melbourne distribution facilities into the new ESR project, according to the AFR account.
The Melbourne project’s sustainability credentials are also in line with CEVA’s corporate social responsibility efforts in the country, the firm’s managing director for Australia and New Zealand Milton Pimenta was quoted as saying.
Mingtiandi reached out to CEVA for comment, but did not get a response by the time of publication.
Aussie Sheds On The Rise
ESR, which recently completed its $5.2-billion acquisition of Singapore-based ARA Asset Management, has been actively expanding its footprint in Australia over the past year, including making the country’s single largest logistics acquisition of 2021 with its A$3.8 billion purchase of Blackstone’s Milestone Logistics portfolio in April last year through a joint venture with GIC.
The Milestone portfolio spans 45 assets covering 1.4 million square metres of combined gross floor area, with key tenants like Australian retail major Woolworths, shipping firm Toll Group and Caterpillar dealer WestTrac, as well as Michigan-based Lineage Logistics — the world’s largest cold storage firm.
The record purchase was followed by ESR’s A$45-million acquisition of an 8.2-hectare industrial property at 2-50 Glenelg Street in Melbourne in December from ASX-listed pharmaceutical firm Palla Pharma.
CBRE in its latest market report said leasing activity in Australia’s industrial market was concentrated in Melbourne where 2 million square metres of floor space was occupied last year, driven by growing demand from the transport, postal and warehousing sectors as e-commerce continues to expand.
The property consultancy projected that logistics demand will remain high this year given the record low vacancy rate of 1.3 percent nationwide and with new supply still limited.