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Knight Frank Australia
Industrial and Logistics
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Construction activity responds swiftly to market shifts The industrial sector’s relatively short build timeframes allow it to adapt quickly to changing market conditions. Developers are easing back the pace of new supply, with completions across the East Coast expected to fall by around 20% in 2025 compared to last year. Melbourne is set to see the sharpest slowdown, with project deliveries forecast to decline by about 40%. Despite this moderation, speculative completions remain elevated in 2025, making up an estimated 52% of total new supply. This is largely the result of projects that commenced in late 2024 and are now reaching completion. However, new speculative starts have become far more limited this year, as tighter feasibility conditions and capital constraints temper developer appetite in the near term. Rental growth moderates and higher incentives now expected After several years of rapid escalation, industrial rental growth is clearly moderating as new supply and higher vacancy bring balance to the market. Across the East Coast, quarterly prime rents ranged from stable in Sydney to a modest 2.2% rise in Brisbane. Adelaide remains the standout performer, achieving a strong 10.1% annual increase — the only market to sustain double-digit growth. Elsewhere, rents have steadied as an influx of speculative completions gives occupiers more choice. Annual growth reached 6.7% in Perth, 5.2% in Brisbane, 4.3% in Melbourne and 2.6% in Sydney, where gains were largely confined to South Sydney. The variation across markets reflects differing levels of vacancy and new supply — land-constrained precincts continue to see upward pressure, while areas with abundant new stock are levelling out. Incentives have risen over the past 18 months as competition for occupiers has intensified. Initially concentrated in new Sydney developments to preserve face rents, incentives have now increased across all major markets. Current ranges sit around 11%–22% in Sydney, 17%–25% in Melbourne (outside the City Fringe), 10%–14% in Brisbane and roughly 8%–10% in Adelaide, with some completed speculative assets reportedly offering higher deals.
Industrial market conditions are showing signs of stabilisation over the first half of 2025, with national vacancy steady at 3.2% and notable variation by city — Sydney remains the tightest at 2.2%, while Brisbane sits higher at 5.1%. Construction activity is slowing, with East Coast completions expected to fall around 20% in 2025 and Melbourne facing a sharper 40% drop, as developers respond to tighter feasibility and capital constraints. After a period unprecedented rental growth, rents have now moderated and incentives have risen across all major markets.
By Marco Mascitelli Director, Research & Consulting Thought Leadership
East Coast Industrial market finding its balance Following a rapid rise in vacancy over the last 18 months across the East coast industrial market, vacancy levels held steady through the first half of 2025, sitting at 2.35 million square metres in Q2 — virtually unchanged from the previous quarter. This equates to a blended vacancy rate of 3.2%, with Sydney remaining tight at just 2.2%, Melbourne at 3.1%, and Brisbane higher at 5.1%. Within each market, however, performance varies considerably, particularly in precincts that have experienced a surge of new construction. Speculative completions has been a key driver of elevated vacancy, contributing around 905,000 square metres, or 38% of all available space. With many new projects reaching completion but leasing at a slower pace than in previous years, the composition of vacant stock is shifting. Secondary space continues to rise, while prime existing space has edged down — now aligning closely with long-term averages.
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