According to a new report from Prological, growth in speculative warehouse development has contributed to lower rents and stable vacancy rates in major industrial property markets.
Australia’s industrial property landscape has undergone a dramatic transformation in the past six months, with Sydney prime rents falling from $269/sqm to $220-230/sqm, a shift which can be linked to how businesses are approaching warehouse facilities.
Prological Outlook: Industrial Property Market Intelligence reveals vacancy across Australia’s East Coast remained stable in Q2 2025 at 2.35 million sqm, however speculative completions totalled 905,000 sqm, or 38% of all available space, meaning more brand-new warehouses without tenants. The shift marks a significant reversal in a sector that has been landlord-dominated for much of the past decade.
Developers have responded by slowing new project rollouts, with East Coast completions forecast to fall 20% in 2025 compared to 2024. Melbourne shows the steepest decline in new project rollout, down 40%.
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The changing dynamics reflect a broader shift in tenant requirements for warehousing. More companies are recognising 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.
“For decades, developers have speculatively built warehouses and successfully found occupiers through the industrial real estate industry. However, 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,”Peter Jones, Managing Director at Prological.
Market conditions by city
Sydney: Vacancy at 2.4% but 201,000 sqm of new supply was added in Q2. Prime rents compressed from $269sqm to $220-230sqm with 20-30% incentives available – the highest incentive levels in a decade.
Melbourne: Vacancy rose from 3.1% to 4.1% as rents declined 1.0% quarterly. Businesses are favouring consolidation and lease renewals over new commitments. The majority of Melbourne’s development pipeline remains uncommitted, creating uncertainty over which projects will proceed.
Brisbane: Highest vacancy at 5.1%, 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: Bucking the national trend with rental growth of 10.1% annually, as tight supply favours landlords. Limited large-scale warehouse development means businesses requiring substantial space face restricted choices, with most projects requiring tenant pre-commitment before construction begins.
Cejay is a Content Producer for Supply Chain Channel, Australia's learning ecosystem created to fill the need for information, networking, case studies and empowerment for everyone in the supply chain sector.
