By Morgan Evans, National Director – Tenant Advisory, Logistics & Industrial, Cushman & Wakefield
For much of the past five years, Australia's industrial and logistics occupiers have operated in a market defined by scarcity. Low vacancy, rising rents, limited development-ready land and intense competition for quality facilities left many tenants with little negotiating leverage and few alternatives when lease events approached.
While industrial fundamentals remain robust, the market is now entering a more nuanced phase. Across Australia's major capital cities, vacancy rates have normalised, rental growth has moderated, and developers have become increasingly selective about speculative construction. For occupiers, this is creating a more balanced environment, though not necessarily an easier one.
The key question for tenants is no longer simply where can we find space? It is now how do we position our business to benefit from evolving market conditions while protecting against future supply constraints?
The Good News for Occupiers
There are several positive themes emerging for tenants across the national market.
Firstly, vacancy has gradually moved higher in several eastern seaboard markets, providing occupiers with greater optionality. Melbourne's vacancy rate has risen to 4.2%, Sydney sits at 3.7%, and Brisbane at 3.5%. This marks a significant shift from the landlord-favourable conditions of recent years.
Secondly, rental growth has moderated substantially. Nationally, prime rents increased by 2.8% over the past years, which is its slowest pace since late 2020, while several major precincts recorded growth below this level. Although rental growth remains positive nationally, it has returned to more sustainable levels.
Equally important, incentives have improved in many markets. In Sydney, incentives for existing prime assets commonly range between 12.5% and 23%, while Melbourne incentives can reach 30% in some outer-ring precincts. This provides occupiers with opportunities to reduce occupancy costs and negotiate more favourable lease structures than were achievable 12 months ago.
As businesses continue to focus on operational efficiency, many are also using lease expiry events as an opportunity to consolidate sites, modernise facilities and improve supply chain performance.
"For tenants, the market has become significantly more strategic. We're seeing businesses take advantage of improved leasing conditions to secure better quality assets, consolidate operations and drive efficiency gains across their supply chains," says Morgan Evans, National Director – Tenant Advisory, Logistics & Industrial at Cushman & Wakefield.
However, Challenges Remain
While conditions have undoubtedly improved for occupiers, it's important not to confuse moderation with oversupply.
The industrial sector continues to be underpinned by strong structural demand. Gross leasing volumes remain healthy across all major markets, with occupiers continuing to target modern, high-quality facilities. In Sydney alone, almost 675,000 sqm of space was leased during the first half of 2026, while Melbourne recorded approximately 770,000 sqm of take-up over the same period.
At the same time, developers have become increasingly cautious, with development pipelines being revised downward as construction costs, feasibility pressures, and economic uncertainty encourage a shift towards pre-lease-led development. Brisbane is forecast to deliver its lowest annual supply since 2018, while Melbourne is expected to record its lowest volume of supply since 2019. Sydney developers are increasingly requiring pre-commitments before commencing new projects.
This creates a unique challenge for occupiers. Availability may appear healthier today, but future supply could become constrained more quickly than many expect.
"The biggest risk for occupiers is assuming today's level of choice will still exist in two or three years. The development market is becoming increasingly pre-lease driven, which means businesses need to engage with their property strategy earlier than ever before," Evans says.
The Flight to Quality Continues
One of the most significant themes across the national market is the widening performance gap between prime and secondary assets.
Occupiers continue to prioritise facilities that improve productivity, automate operations and support ESG objectives. In Melbourne, approximately 85% of space leased during the quarter was prime grade, highlighting the ongoing flight to quality.
Older, less functional facilities are taking longer to lease and often require higher incentives to remain competitive. Conversely, modern logistics facilities in strategic locations are still attracting strong demand despite softer economic conditions.
This divergence is creating a more segmented market, where tenants may have greater negotiating power on secondary assets but still face competition for the best-quality accommodation.
A National Market with Local Differences
Although national trends are converging, local market conditions remain highly varied.
Perth and Adelaide continue to operate with extremely tight vacancy levels of 2.2% and 2.7% respectively, maintaining significant pressure on occupiers seeking quality space. Brisbane's tightening supply pipeline suggests current leasing opportunities may be temporary, while Melbourne appears to offer the greatest balance between tenant choice and affordability among Australia's major industrial markets. Sydney continues to benefit from strong occupier demand as rental growth normalises and vacancy edges higher.
According to Luke Crawford, Cushman & Wakefield's Head of Logistics & Industrial Research, Australia, the market is transitioning rather than weakening.
"Across Australia, we're seeing industrial markets move from exceptionally tight conditions toward a more sustainable equilibrium. Demand remains resilient, but occupiers are becoming more selective and developers are increasingly cautious, creating a more balanced environment than we've seen for several years," Crawford says.
Looking Ahead
The remainder of 2026 is likely to be characterised by moderation rather than material correction.
Vacancy rates may edge higher in some markets as speculative completions are delivered, but resilient tenant demand is expected to prevent any significant deterioration in fundamentals. At the same time, shrinking development pipelines are likely to support rental growth and occupancy levels over the medium term.
For occupiers, the message is clear: this is a window of opportunity, not a permanent shift in bargaining power.
Businesses that proactively plan future lease events, evaluate consolidation opportunities and engage early with the pre-lease market will be best placed to secure favourable outcomes.
"Industrial real estate remains fundamentally landlord-supported, but the negotiating landscape has become more balanced. Occupiers who act early, understand their options and align property decisions with business objectives will be the biggest beneficiaries of the current market cycle," Evans concludes.
