Australia’s industrial property market has ridden a wave of extraordinary growth in recent years.
Rents, land values, and demand all spiked in the post-COVID scramble for logistics and warehousing, driving record levels of development.
Now, with vacancy rates edging back towards normal levels, attention is turning to what comes next.
Knight Frank’s new research report, From Surge to Stabilisation, sets out where rents, supply, leasing, and land values may be heading.
We spoke with Knight Frank Partner Jennelle Wilson to unpack the findings.
Rents Ease, But Unevenly
The report reveals that vacancies on the East Coast have risen from a record low of 0.6% in March 2023 to 3.2% today - still tight, but no longer unprecedented.
That shift has cooled headline rental growth, which is expected to slow in the near term after the leasing frenzy of recent years.
The picture, however, is not uniform.
Emerging hubs with high development pipelines, such as Sydney’s South West and Outer South, Melbourne’s North, and Brisbane’s South and South West, are more exposed and less likely to see gains.
Mature precincts with tighter vacancy, including Sydney’s Inner South, Melbourne’s South East and East, and Brisbane’s Trade Coast, are tipped for stronger growth.
“Industrial rental growth is becoming less uniform across the markets, with continued face growth occurring in precincts with relatively lower recent supply additions,” Ms Wilson said.
“For the precincts with higher levels of existing or speculative development vacancy, there has been a pause in face rental growth and an increased focus on incentives to attract tenants.”
Pipeline Slows as Market Rebalances
After years of record construction, the development pipeline is tapering.
Knight Frank expects supply to rebalance quickly as speculative projects fall away and pre-commitments take the lead.
The slowdown will be most visible from late 2025 into 2026.
“New supply across the East Coast is expected to be about 20% lower for 2025 than it was in 2024 with fewer development starts,” Ms Wilson said.
Elevated construction costs, capital constraints, and rising vacancy have made feasibility difficult, curbing speculative activity.
“The relatively faster construction time for industrial assets means that the supply pipeline can be adjusted quickly and any overhang will not last long,” she said.
Pre-commitments Drive Next Wave
Speculative development, which accounted for more than half of new construction in 2025, is set to retreat to more normal levels.
From 2026, pre-commitments are expected to dominate as tenants pursue efficiency through automation, sustainability, and modern facilities.
“Speculative allocation in 2026 will return towards more standard levels of 30% of new supply, with the majority coming from pre-commitment activity,” Ms Wilson said.
Occupiers with specialised needs will continue driving this trend, though projects will only proceed if tenants are prepared to pay economic rents.
The shift is expected to split the market. Some occupiers will pay a premium for advanced facilities, while others will prioritise cost control even if it means settling for older stock.
Serviced Lots Hold Their Value
Industrial land has been among the strongest performers of the past five years.
On the East Coast, small blocks have climbed between 46% and 118%, while lots of 1–5 hectares have surged 46% to 131%.
Although values in Sydney and Melbourne have levelled off, serviced land is expected to remain resilient.
“Recent years have proven that the timeline for industrial land servicing and development is the most critical step in the development process,” she said.
“Lessons learnt across Western Sydney, and to a lesser extent Brisbane and Melbourne, particularly around water and power delivery, will insulate serviced land values even as immediate demand eases.”
