Industrial Holds Firm as Demand Continues to Outpace Supply

While vacancy is edging up in some markets and holding tight in others, both reports suggest a structurally constrained supply environment is still underpinning fundamentals, particularly for prime-grade assets.

Across the country, Cushman & Wakefield recorded about 1.3 million square metres of leasing activity in the second quarter 2026, while CBRE estimated first-half net absorption exceeded 1.4 million square metres—more than double the prior half.

National vacancy was broadly steady, sitting between 3.2 per cent and 3.7 per cent depending on methodology, with both firms noting the market remains below long-term equilibrium levels.

Demand holds firm despite new supply

The resilience in take-up came despite a wave of speculative completions, with Cushman & Wakefield noting more than 250,000sq m of new supply delivered in the quarter alone.

However, strong leasing across key hubs offset much of this, reinforcing the view that occupiers are still active when space aligns with operational needs.

Cushman & Wakefield head of logistics and industrial research Luke Crawford said businesses were increasingly using lease events to consolidate and upgrade into higher-quality facilities rather than expand footprint significantly.

That theme is echoed in CBRE’s findings, which show landlords achieving stronger outcomes where they offer competitive incentives, early access, and fit-out contributions—particularly in the super-prime segment.

Two-speed market emerges

Both reports point to a growing divide between asset classes.

CBRE described vacancy as increasingly concentrated in older prime and secondary stock, while modern facilities continue to outperform.

Cushman & Wakefield similarly highlighted the flight to quality, with Melbourne experiencung around 85 per cent of take-up in prime-grade assets during the quarter.

This bifurcation is reshaping leasing dynamics.

In Melbourne, vacancy has lifted modestly to the low-4 per cent range as supply enters the market, while occupiers continue shedding surplus space.

By contrast, tighter markets such as Perth and Adelaide are seeing sustained pressure on availability, particularly for modern facilities with higher-spec logistics capability.

Sydney, Brisbane and Perth drive divergence

Sydney delivered a surprise uptick in demand, with Cushman & Wakefield reporting its strongest quarter of take-up in more than a year and CBRE placing vacancy in the mid-3 per cent range.

However, both expect short-term upward pressure on vacancy as additional speculative supply completes.

Brisbane continued to stand out as one of the nation’s most resilient markets, supported by population growth, infrastructure investment and limited development pipelines.

Vacancy remained near the low-3 per cent range, with both firms pointing to strong absorption and steady rental growth.

Perth remained the tightest major market in the country, with vacancy around 1–2 per cent depending on the measure. Strong demand from warehousing, logistics and e-commerce users has pushed rents higher and intensified competition for scarce modern stock.

Adelaide also was structurally constrained, with vacancy hovering around 2 per cent and limited availability outside core precincts continuing to drive renewals rather than relocations.

Supply discipline shaping the next phase

Cushman & Wakefield and CBRE expect vacancy to remain contained through the second half of 2026, potentially peaking modestly before stabilising or easing into 2027 as the development pipeline moderates.

However, the more significant structural shift is on the demand side.

Occupiers are increasingly prioritising efficiency, ESG performance and operational functionality over expansion, while third-party logistics activity remains subdued and data centre-linked demand emerges as a growing source of enquiry.

The consensus across both reports is that Australia’s industrial market is entering a more selective phase of the cycle.

While headline vacancy may fluctuate, the underlying constraint remains clear: high-quality, modern space is in short supply, and that imbalance is likely to define performance through the next development cycle.