Robust growth is predicted in Melbourne's retail and industrial markets, according to BIS Shrapnel chief economist Frank Gelber.

In a meeting of the Real Estate Institute of Victoria, Dr Gelber said that retail investment had improved and yields stabilised.

Although a question mark still hung over consumer spending, he said ''As economic growth strengthens, so too will consumer spending.

''No major setbacks are envisaged before the end of the decade at the earliest. This should underpin solid growth in retail rents and shopping centre incomes.''

According to him, the major threat to stability was a slump in the value of the Australian currency. This would squeeze retailer profit margins, which had enabled businesspeople to take in rental hikes. Retail property, however, would enjoy strong income growth, but not the outstanding capital returns of 2003-07.

While Melbourne's industrial property market was recuperating from the global financial crunch, excess capacity had been absorbed, particularly in warehousing, said Dr Gelber. Businesses anticipating future demand were replenishing and leasing had increased.

''On the supply side, industrial construction in Melbourne has collapsed,'' he said. Factory and warehouse building was at its lowest level in 14 years, he said.

''Industrial supply is constrained because construction remains broadly unfeasible at current market rents, yields and land values, with pre-commitment rents well above rents for existing prime space,'' he said.

Yields were predicted to cycle around the present longer term average of 8.5 per cent. ''That means rents will need to rise appreciably, or land values fall, for new development to get under way.''

According to Dr Gelber, tenant demand in Melbourne's office market was solid, and with little new supply, vacancy rates were likely to narrow. ''We estimate the CBD vacancy rate will be below 4 per cent by June 2012. In turn, rents will double over the next five or six years in Melbourne.''