Warehouse, Industrial Rents Fall as Market Repositions

For the first time in nearly a decade, tenants hold the negotiating power in Australia’s industrial property market.

Developers are offering incentives of up to 30 per cent while 905,000sq m of new warehouses are empty across the east coast.

Prological’s Industrial Property Market Intelligence report released this month revealed vacancy across the east coast was stable in the second quarter of 2025 at 2.35 million square metres.

Speculative completions totalled 905,000sq m—about 38 per cent of all available space.

The shift is a reversal in a sector that has been landlord-dominated for much of the past decade.

Developers have responded by slowing new project rollouts—east coast completions are forecast to fall 20 per cent in 2025 compared to 2024.

Prological managing director Peter Jones said that while “developers have speculatively built warehouses and successfully found occupiers through the industrial real estate industry … finding tenants at the same pace and density has become increasingly difficult”.

“This shifting landscape requires a more integrated approach to industrial property decisions for tenants, where real estate availability and costs can become primary drivers of supply chain strategy rather than secondary considerations,” Jones said.

Melbourne project starts slow

Market conditions vary significantly by city. Sydney’s vacancy is 2.4 per cent with 201,000sq m of new supply added in the second quarter.

Prime rents compressed from $269 a square metre to $220-230 a square metre with 20-30 per cent incentives available—the highest incentive levels in a decade.

Melbourne’s vacancy rose from 3.1 per cent to 4.1 per cent as rents declined 1 per cent quarterly.

Businesses are favouring consolidation and lease renewals over new commitments, with Melbourne showing the steepest decline in new project rollout, down 40 per cent.

▲ Speculative warehouse construction has outpaced tenant demand across Australia’s east coast industrial markets.

The majority of the city’s development pipeline remains uncommitted, creating uncertainty over which projects would proceed.

Brisbane recorded the highest vacancy at 5.1 per cent, though rents have stabilised rather than fallen. Leasing take-up slowed for two consecutive quarters, with pre-leasing activity slowing significantly compared to 2023.

Adelaide is bucking the national trend with rental growth of 10.1 per cent annually, as tight supply favours landlords.

Limited large-scale warehouse development means businesses requiring substantial space have limited choices, with most projects now requiring tenant pre-commitment before construction begins.

The report suggests changing dynamics reflect a broader shift in tenant requirements for warehousing.

More companies recognise that custom-designed facilities deliver long-term operational savings that justify higher upfront costs, rather than leasing existing stock—creating a situation where high-quality stock sits vacant while businesses explore greenfield facilities.

With current conditions unlikely to persist as market cycles are likely to return to historical patterns, the report suggests businesses requiring industrial space should move quickly to lock in favourable terms.