RENTS, LAND VALUES AND DEVELOPMENT IN FOCUS AS INDUSTRIAL MARKET STABILISES
Australia’s industrial property market is moving from a post-COVID boom to a steadier phase, with vacancy rates normalising and rental growth diverging across regions.
3 min
Australia’s industrial property market is shifting gears after five years of record-breaking growth in demand, rents and construction.
Vacancy levels have climbed from historic lows, bringing the sector back into more balanced territory, according to Knight Frank’s latest research, From Surge to Stabilisation.
Vacancy rates normalise
Blended vacancy across the East Coast now sits at 3.2 per cent. While still considered tight, that represents a significant change from the 0.6 per cent recorded in the first quarter of 2023. The post-COVID surge in tenant demand had driven unprecedented leasing take-up and fuelled a wave of new construction, but that momentum has since cooled.
The report suggests that effective rental growth will remain subdued in the short term, although the picture is far from uniform. Vacancy is expected to concentrate in emerging precincts with a large pipeline of new projects, while more established markets are likely to prove resilient.
Diverging rental outlook
Sydney’s South West and Outer South, Melbourne’s North and Brisbane’s South and South West are flagged as more exposed, with lower prospects for rental growth. By contrast, Sydney’s Inner South, Melbourne’s South East and East, and Brisbane’s Trade Coast are expected to deliver stronger outcomes thanks to lower construction and tighter vacancy.
Knight Frank Partner, Research and Consulting, Queensland, Jennelle Wilson, said tenants in some markets will still face higher costs even as more space becomes available.
“It is expected that face rents will be defended with a corresponding increase in incentives to impact effective rents,” she said. “Tenants on leases negotiated prior to 2021 will still face significant rental reversion on renegotiation or relocation, despite having greater choice in the market, to bring them into line with current market rents resulting from significant growth over the boom.”
According to Wilson, prime industrial rents rose by between 30 and 60 per cent on the East Coast over the past three years, underscoring just how intense the recent surge was.
Supply pipeline rebalances
The report found that the supply side will correct relatively quickly, with speculative development slowing and more reliance on pre-commitments. Lower levels of speculative projects and a greater focus on pre-leased space are expected to ease new supply through the second half of 2025 and into 2026.
Wilson said occupiers will continue to look for operational efficiency and upgrades. “Over time, there will be a lift in pre-commitment activity as upgrading and unlocking operational efficiency remains key for large occupiers,” she said. “A more conservative development environment will limit speculative supply in 2026, diverting demand back to pre-commitments to tenants seeking a technology and building fabric upgrade.”
She added that the market would increasingly split between businesses willing to pay for high-efficiency, tech-enabled facilities and those seeking to minimise rental costs, even if it means compromising on optimisation.
Land values remain firm
One of the strongest findings from the research is that serviced industrial land values are expected to hold firm, even as demand eases. Over the past five years, land values across the East Coast have climbed sharply — by 46 to 118 per cent for smaller blocks and 46 to 131 per cent for lots of one to five hectares.
While prices have plateaued recently in Sydney and Melbourne, Wilson said the most significant bottleneck has been the time taken to service land.
“In contrast to building construction timeframes, 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 from markets such as Western Sydney, and to a lesser extent Brisbane and Melbourne, around the delivery of power and water are expected to continue supporting values.
Looking ahead
The industrial market is settling into a new rhythm. Rental growth will be patchy, depending on location and level of development.
Pre-commitments are expected to dominate new supply, while speculative activity is expected to recede. And despite a cooling in overall tenant demand, the value of well-serviced land is likely to remain robust.
For investors, developers and occupiers alike, the message is clear: the frenzy of the boom years is over, but fundamentals remain strong for quality assets in the right locations.
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Australia’s housing market defies forecasts as prices surge past pandemic-era benchmarks.
First-home incentives can still form part of a long-term investment plan if used strategically.
3 min
Australia’s home prices continue to grow, and while that makes them great investments, they are also some of the most unaffordable in the world.
That’s why first-home buyer schemes such as the First Home Owner Grant, the First Home Guarantee, and stamp duty concessions have become so valuable.
These programs are designed to reduce upfront costs and fast-track people into homeownership.
But the question many aspiring investors are now asking is can these schemes be used as part of an investment strategy? These government initiatives aren’t designed for investors, but they can still play a key role in your long-term investment journey if used strategically.
What the schemes actually allow
Every first-home buyer incentive in Australia is created to support owner-occupiers, not investors.
Whether it’s a cash grant, reduced deposit requirement, or a stamp duty discount, the catch is always the same in that you must live in the property for a set period of time. For example, the First Home Owner Grant often requires you to live in the property for at least six to twelve months, depending on the state.
The First Home Guarantee allows you to purchase with just a 5 per cent deposit without paying lenders’ mortgage insurance, but again, you’re required to live in the property for at least one year.
Likewise, state-based stamp duty concessions are only available for properties intended as a principal place of residence. If your intention from the outset is to buy a property solely for rental income, you won’t be eligible. However, if you’re open to living in the property initially, then transitioning it into an investment, there’s a path forward.
A strategy that works
Rentvesting has emerged as one of the most practical ways for first-time buyers to take advantage of these schemes while also laying the groundwork for a property portfolio.
The concept is simply, buying a property in an area you can afford (using the first-home buyer schemes to assist), live in it for the minimum required period, and then rent it out after fulfilling the occupancy condition.
This approach lets you legally access the benefits of first-home buyer schemes while building equity and entering the market sooner. Instead of waiting years to save a full 20 per cent deposit for an investment property, or getting priced out altogether, you get your foot in the door with reduced upfront costs.
Once you’ve satisfied the live-in requirement, the property can become an income-generating asset and even serve as collateral for your next purchase.
What to look for in a rentvestment property
If you plan to eventually convert the property into an investment, you need to think beyond your short-term living experience. It’s essential to buy a property that performs well both as a home and as a long-term asset.
That means looking at key fundamentals like location, rental demand, and growth potential. Suburbs with strong infrastructure, access to employment hubs, good transport links, and low vacancy rates should be high on your list.
A balanced price-to-rent ratio will help ensure manageable holding costs once the property transitions to an investment.
Established low-density areas often outperform high-rise apartment developments that flood the market with supply and limit capital growth. And ideally, your property should offer scope for future improvements, whether that’s a cosmetic renovation, granny flat addition, or potential to subdivide down the track.
Mistakes to avoid
There are a few common missteps that can undermine this strategy. The first is selling too soon. Some grants and stamp duty concessions include clawback provisions if you offload the property within a short period, which could see you lose the benefits or even owe money back.
It’s also a mistake to let the lure of a government handout sway your purchasing decision. A $10,000 grant doesn’t justify compromising on location, growth prospects, or property fundamentals.
Another pitfall is failing to consider the financial impact once the property becomes an investment. Repayments, tax treatment, and outgoings may change, so it’s important to stress-test your position from day one.
Lastly, beware of buying into oversupplied areas simply because they’re marketed to first-home buyers. Not all new builds are good investments. If hundreds of identical properties are being built nearby, your long-term growth could be seriously limited.
With the right approach, your first home can be the foundation for an entire property portfolio. It starts with using available government support to lower your entry cost.
From there, you occupy the property for the required time, convert it to an investment, and leverage the equity and rental income to fund your next purchase.
Many of the most successful investors today began with a single, strategically chosen property purchased using these exact schemes. By buying well, you can turn your first home into the launchpad for long-term wealth.
Abdullah Nouh is the Founder of Mecca Property Group (MPG), a buyers’ advisory firm specialising in investment opportunities in residential and commercial real estate. In recent years, his team has acquired over $300 million worth of assets for 250+ clients across Australia.
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