How will industrial take-up in Australia fare in 2025?

Analysts believe there are positive signs for the year.

The industrial sector in Australia has seen a year of slowing growth according to Dexus Research, with net face rent growth flattening in the past quarter and incentives rising. The ongoing cost of living pressures have constrained retail spending with flow-on effects for the warehouse leasing market.

“Take-up in 2024 was a little higher than the previous year and slightly above pre-COVID levels. There were several large pre-lease deals that boosted take-up despite reduced demand overall. There are some positive signs for 2025, as retail spending has been firming in the past few months and online spending is rising again. These trends should lead to increasing demand from retailers and 3PLs,” the report said.

Here’s more from Dexus Research:

Vacancy rates have continued to rise across the nation, albeit remain low in absolute terms. New supply brought to market and a preference by occupiers for newer premises has meant that solid pre-commitment take-up was accompanied by higher vacancy in older sheds.

However, supply completion levels were lower in Q4 and going into 2025 it is likely that developers will reduce the level of speculative developments where possible as costs remain high and development margins are tight. Positive demand and lower levels of speculative supply should help limit vacancy levels.

Prime net face rents in the Outer West of Sydney rose 2.2% in the quarter and 5.3% over the year. Other markets were flat in the quarter such as Inner West and South Sydney, but still grew over the year with 3.8% and 11.7% respectively. Melbourne and Perth rents were mostly flat. In Brisbane, the Southern Brisbane and the Australian Trade Coast markets enjoyed positive face rent growth, growing 3.7% and 4.0% over the quarter. Incentives have risen in most markets through 2024, so effective rents fell in some of the outer markets.

Average prime yields remained stable across most markets through Q4 and are forecast to see limited movement through 2025. Almost all markets, save West Melbourne which saw a 25-bps increase, saw no yield change over the quarter.