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Knight Frank Australia
Industrial and Logistics
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Market Dynamics These drivers are fuelling strong demand across the market. Vacancy rates remain tight at under 5%, with occupiers facing limited choice in modern, high- clearance warehouses. This scarcity has translated into rental growth, outpacing long-term averages and narrowing the gap with Sydney. Land availability is also constrained, particularly for lots over 3 hectares, which has lifted land values significantly over the past 24 months. Our recent sale campaigns have generated strong interest from both local and out-of-area investors, including institutional funds. Historically, Newcastle flew under the radar for these groups, largely due to asset pricing typically falling below the $10 million mark a scale too small to support fund structures. However, as the market has grown, asset values are now regularly exceeding $15 million, putting Newcastle on the radar of sophisticated purchasers seeking diversification and yield spread relative to Capital Markets. Rental reversion is also becoming a key part of the investment thesis, with many older leases rolling off below-market rates and resetting to current levels in the $175–$220 per sqm net range. Market yields are typically sitting in the range of 5.75% – 6.25% assuming market rental which still offers a spread to metro cores. This dynamic is underpinning confidence in both income and capital growth and often investors are comparing property prices to replacement values. Local Expertise While the fundamentals are strong, businesses need to understand Newcastle’s unique dynamics. Planning frameworks can differ from metropolitan councils, requiring early engagement to navigate zoning and infrastructure contributions. The Hunter region is widely known for its’ skilled industrial workforce, but competition is increasing as more national firms set up operations. Supply chain operators must also factor in port diversification strategies and rail capacity, which are still evolving. Overall, Newcastle offers a compelling combination of stronger returns, rental uplift, and long-term growth prospects. The consensus outlook is further land value appreciation, underpinned by supply shortages and ongoing infrastructure delivery. In our opinion Newcastle is no longer a secondary consideration and instead a strategic industrial market, fuelled by infrastructure, diversified demand, and alignment with Australia’s energy future.
Infrastructure & Investment A wave of infrastructure investment is accelerating this transformation. The Port of Newcastle is reinventing itself as a diversified trade hub, with projects spanning hydrogen, fuel import terminals, and container capacity. Road and rail upgrades are strengthening links to Sydney and the broader Hunter Valley, while the Newcastle Airport’s $55M terminal upgrade/expansion is creating an international gateway for business and freight. Developers are responding in kind. Industrial precincts around Mayfield, Heatherbrae, and Beresfield are seeing new larger warehousing, largely led by local private developers delivering speculative and pre-lease product. Energy infrastructure is another catalyst, with renewable energy zones mapped across the Hunter that are drawing global players in hydrogen, battery storage, and advanced manufacturing. Newcastle is also emerging as a hub for green energy initiatives within its industrial precincts. Companies operating in the Mayfield and Heatherbrae areas are increasingly integrating solar, battery storage, and energy-efficient building design into their facilities, while local renewable energy zones are attracting investment from hydrogen, wind, and solar developers. The region’s industrial clusters are becoming living examples of how sustainability and commercial activity can coexist, supporting occupiers’ ESG objectives and reducing operational emissions. The expansion of the Port of Newcastle’s deep-water terminal is another significant catalyst. Designed to handle larger vessels and more diversified cargo, the terminal will enhance the city’s freight capacity, strengthen import/export logistics, and support energy transition projects by enabling bulk imports of clean fuels, hydrogen, and renewable energy components. This investment reinforces Newcastle’s strategic position as a major industrial and trade gateway on the east coast. Strategy & ESG Considerations Newcastle is also aligning neatly with occupiers’ ESG priorities. Its proximity to the port, rail corridors, and renewable energy zones enables shorter, greener supply chains and lower emissions compared to congested metro hubs. The region is positioning itself as a leader in the energy transition, with hydrogen production, wind assembly, and battery storage projects either committed or in advanced planning. Local government has been proactive in supporting ESG-aligned activity, streamlining approvals for renewable projects and promoting industrial zones that integrate sustainability features. For corporates under pressure to meet carbon reduction targets, Newcastle offers a tangible opportunity to align operations with long-term sustainability goals.
Thought Leadership
Newcastle’s Industrial Market: A City on the Rise By Dan Barry Partner, Industrial Agency Framing the Opportunity For decades, Newcastle has been viewed as a secondary market to Sydney, Brisbane, and Melbourne. However in recent times, the Hunter region is emerging as one of Australia’s most compelling industrial hubs. Nationally, the industrial and logistics sector continues to outperform other asset classes, underpinned by e-commerce, supply chain resilience, and nearshoring strategies. Locally, Newcastle offers a unique blend of affordability, connectivity to the north and south, and future-facing industries that are bringing it to light. Unlike the scarce and competitive land and rental markets of Capital Markets such as Sydney and Melbourne, Newcastle still offers relative value, with opportunities for both occupiers and investors to secure scale without the price pressure of core metro markets. Importantly, demand is not confined to one sector. Logistics operators are attracted by proximity to the Port of Newcastle and improved road links. Defence contractors are leveraging the region’s long association with the Williamtown RAAF Base. Renewables and manufacturing groups are also circling, drawn by government incentives and the city’s role in Australia’s energy transition.
Market Snapshot (2025) • Net rental rates: $175–$220 per sqm • Market yields: 5.75%–6.25% • Land sale rates (5,000sqm): $500 - $1,000 per sqm + GST • Vacancy: Sub-5% for industrial assets over 1,000 sqm, with availability even tighter for modern, high-clearance stock. • Incentives: 5-8% • Site area in demand: 5,000 sqm – 15,000 sqm • Key precincts: Mayfield, Heatherbrae, Beresfield • Major sectors driving demand: Logistics, manufacturing, renewables, defence • Notable infrastructure projects: Port of Newcastle upgrades, Newcastle Airport expansion, road & rail links, renewable energy zones
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