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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The new Brooklyn Tower, a mix of luxury condos and rentals, rises from the historic Dime Savings Bank building.
3 min
Listing of the Day
Location: Downtown Brooklyn, New York
Price: $16.75 million
Boasting 360-degree panoramic views across New York City, this new 92nd-floor penthouse is the highest residence in Brooklyn.
The full-floor apartment stands atop the new Brooklyn Tower, which encompasses 143 condos and 398 rentals in the heart of downtown Brooklyn, said Katie Sachsenmaier, senior sales director, Corcoran Sunshine Marketing Group.
The condos begin on the 53rd floor, and the penthouses begin on the 88th floor. This one, Penthouse 92, is the only full-floor penthouse.
“The building is coming into its own now,” she said. “It feels very busy when you step into the lobby.”
Developed by Silverstein Properties, the building at 85 Fleet Street rises from the historic Dime Savings Bank building, according to a news release.
It was designed by SHoP Architects with interiors curated by Gachot Studios, and it is the borough’s only super tall skyscraper.
Penthouse 92 features custom interiors by Brooklyn-based Susan Clark of design firm Radnor, Sachsenmaier said. “Her selections have made it really beautiful. It feels very warm and inviting.”
Architectural details include 12-foot ceilings, European white oak floors in a custom honey stain, mahogany millwork, bronze detailing and floor-to-ceiling windows.
The eat-in kitchen features Absolute Black stone countertops, an island with seating, oil-rubbed bronze Waterworks fixtures and integrated Miele appliances, according to the listing.
The primary en suite bathroom showcases large-format Honed Breccia Capraia marble. There is also a separate laundry room as well as a wet bar and a butler’s pantry.
The views are spectacular, Sachsenmaier said. “If you’re standing in the living room, you take in the Statue of Liberty and all the way up through Midtown. On a clear day, you can see the planes take off at LaGuardia (Airport).”
Photo: Sean Hemmerle
Moving around the apartment, you see south over the harbor and then north and east over the whole city, she said.
From the front door, “you’re immediately greeted with the expansive living room and the view,” she said. “It’s really the first thing you see.”
The primary suite features a dressing room, multiple walk-in closets, two bathrooms (one with a cedar sauna) and southwest-facing windows, Sachsenmaier said. “You get those really beautiful harbour views.
The amenities will be ready by the end of summer, she said. A Life Time club will occupy the entire sixth and seventh floors, and an outdoor pool deck wraps around the dome of the bank building.
Stats
The 5,891-square-foot home has four bedrooms, five full bathrooms and one partial bathroom.
Amenities
Residents will have access to over 100,000 square feet of exclusive indoor and outdoor leisure spaces.
Fitness company Life Time will manage an array of amenities that include a 75-foot indoor lap pool, outdoor pools, a poolside lounge and atrium, a billiards room, a library lounge, a conference room, a theatre with a wet bar, a children’s playground and playroom and limited off-site parking.
The Sky Park offers an open-air loggia with a basketball court, foosball, a playground and a dog run.
Photo: Gabriel Saunders
Neighbourhood Notes
Downtown Brooklyn is at the centre of a number of neighbourhoods, including Fort Greene, Cobble Hill, Boerum Hill and Brooklyn Heights. The tower has access to 13 subway lines, 11 commuter trains, the city’s ferry network and 22 Citi Bike stations.
“You can walk to Fort Greene Park in less than 10 minutes,” and Dekalb Market Hall, which has a Trader Joe’s, a Target and a food hall, is “right next door,” Sachsenmaier said.
Agent: Katie Sachsenmaier, senior sales director, Corcoran Sunshine Marketing Group
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