ESR and Mitsubishi to drive new $175m Pakenham industrial estate

Japanese investors are expanding in yet another corner of Australian real estate, with the hot logistics market now in their sights.

An artist’s impression of Enterprise Industry Park in Pakenham, Victoria, to be developed by ESR Australia and Mitsubishi Estate Asia.

Asian warehousing giant ESR will team up with Japan’s Mitsubishi Estate Asia to develop a $175m industrial estate in the Melbourne suburb of Pakenham as foreign capital partners make the running in the sector.

Big-name players including PGIM Real Estate and Goldman Sachs Alternatives have poured into the area and more large plays are expected as big managers recapitalise their portfolios.

The deal will activate the site at 92 Enterprise Road, which ESR bought on its balance sheet in 2021, and become a top facility in the city’s southeastern suburbs.

The original site spanned about 25ha, and ESR later carved off more 13ha to a private owner-occupier. The new partnership with MEA will acquire the remaining 12.1ha of the site on which it will develop a 70,000sq m prime industrial estate to be known as Enterprise Industry Park, with an end value of about $175m.

The first stage of the development, a 12,600sq m building pre-leased to a global textile manufacturer, is under construction and it is expected to be completed in early 2025.

Work on the second stage is expected to start within the second half of this year, and is available for lease.

Melbourne’s southeast is a key location for industrial estates, however limited land is available, and Enterprise Industry Park is billed as giving customers a cost-effective alternative to the well-established Dandenong market.

The site is near the Princes Freeway and is well connected to the city’s key infrastructure and population hubs of southeast Melbourne and further afield.

ESR Group deputy chief executive and ESR Australia chief executive Phil Pearce welcomed the Japanese capital partner.

“We look forward to a long and fruitful partnership with Mitsubishi Estate Asia,” Mr Pearce said.

“The partnership aligns with the broader ESR Group’s continued focus on lightening its balance sheet and diversifying capital sources.

“This partnership reflects ESR Australia’s development capabilities, and together with Mitsubishi Estate Asia, will focus on delivering a modern portfolio of high-quality and strategically located industrial estates.”

He said demand in the area was among the strongest in the country.

ESR also teamed up with Frasers to buy a site in nearby Cranbourne earlier this year, as the group looked to cater to different customers. It is planning a combination of pre-committed and speculative development on the site.

Mr Pearce said that capitalisation rates in the sector had probably peaked and strong rental growth had allowed capital values to hold up.

The deal was advised on by Greg Hyland and Stuart McCann from CBRE for ESR and by Nathan Parris from Emerge Capital for MEA.

The venture with ESR marks the Japanese firm’s first significant investment in logistics and industrial property, after a series of successful forays into residential and commercial development.

Mitsubishi Estate Asia head of Australia Yuzo Nishiyama noted the attraction of the sector.

“This transaction is an important milestone in our strategic expansion in Australia where we are now invested in every key real estate sector, including living, office, hotel and now logistics and industrial,” Mr Nishiyama said.

“MEA’s goal is to expand further in these key sectors with the valuable support of our trusted partners.”

Originally published as ESR and Mitsubishi to drive new $175m Pakenham industrial estate