Industrial property markets show signs of stabilisation amid high costs and evolving supply

The national industrial market has continued to experience flow-on effects from the surge in demand following the COVID-19 era. A rapid increase in rents from circa 2021, which eased nationally in 2023, resulted in record low yields for properties listed for sale. Ballooning construction costs and a lack of available and suitably zoned industrial land in various markets translated to a surge in refurbishments through this time and this delayed an increase in new supply. Across each industrial state market, this refurbishment market peak is continuing to be felt at differing times. From a national perspective, however, we’re seeing an overall steadying of yields.

South Australia’s pent-up demand and shortage of prime grade industrial accommodation has meant the introduction of over 50,000 square metres of new space has been readily absorbed, the majority of which was pre-committed. Among the large warehouse additions, we are aware of two new constructions, 93-111 Edinburgh Road and 616 Torrens Road which have been speculatively built and are being marketed for lease. Within the smaller warehouse space, the vacancy is higher and the supply harder to estimate, but the availability of stock is now closer to demand than it has been in the past few years. That said, yields remain at a 10-year low.

Supply within Western Australia has been lower than long-term trends and is likely to remain that way over the next 12 months. The approximately 100,000 square metres of new industrial space expected to come online in the latter half of the year is generally pre-committed with a notable absence of spec building. The impact of these additions, along with infill refurbishments, has marginally increased the vacancy rate to close to 1.0 per cent. The supply pipeline in 2025 is expected to be a record year with approximately 64 per cent already pre-committed.

Queensland has bucked the national trend and experienced a considerable increase in new supply above the historic 10-year average. A significant share of this new development is expected to be within the south. Thus far the estimated completion is circa 250,000 square metres of new supply, fuelled by the surge in net face rents of the last five years. The result is likely to be an easing of some projects expected completion dates to 2026 and a shift back to a greater reliance on pre-commitments.

The continued easing of yields in both secondary and prime grade yields and stabilisation of rents in Victoria indicates that the high supply expected in 2025 is not likely to continue into 2026. A subdued pipeline below the historic 10-year average is anticipated until face rents and vacancy align with longer term trends making developments more feasible. The current speculative supply is likely to shift to a pre-commitment strategy. Thus far in 2025 the vast majority of supply has been within the tightly held southeast region.

NSW has been more bullish than the remainder of the country with pre-commitment levels below 40 per cent. The expected circa 1.5 million square metres of new space is predominantly within the inner and outer western regions. Several developments within this pipeline are those that were projected to be completed in 2024. Low pre-commitment levels have contributed to the increase in vacancy within the western regions and an easing in rentals.