What will drive the Australian industrial sector’s strong performance?

Supply chain transformation and capital depth are significant factors.

Australia’s industrial and logistics sector is set to maintain its outperformance as structural demand drivers, improving market liquidity and strong investor appetite continue to support capital deployment, according to Savills Australia.

In its recent report, Savills said supply chain transformation — driven by e-commerce growth, onshoring strategies and a heightened focus on resilience — remains a defining theme shaping both occupier and investor behaviour.

“Investors and occupiers are increasingly prioritising assets that support flexible, efficient and sustainable logistics networks,” Savills said, adding that these preferences are reinforcing demand for well-located industrial real estate across key markets.

Industrial investment volumes have remained robust, with approximately AU$12.5 billion in transactions recorded in the year to September 2025 for deals above AU$10 million. This represents a 15% increase year-on-year from AU$10.9 billion in the previous period, highlighting sustained capital interest despite broader economic uncertainty, Savills reported.

The consultancy noted that growing buyer depth is placing downward pressure on prime yields in select submarkets, signalling active and opportunistic capital where high-quality product is available. Market liquidity has improved further, supported by a diverse and expanding buyer pool, with particular interest in urban infill and near-city locations offering repositioning or redevelopment potential.

Development activity also remains firmly on investors’ radar. Savills said groups are increasingly targeting medium-term development pipelines, particularly in supply-constrained markets where barriers to entry are higher and long-term fundamentals remain compelling.

Looking ahead, Savills expects population growth and resilient consumer spending to continue underpinning demand for industrial and logistics assets. At the same time, ongoing constraints on land availability and the limited supply of modern facilities are expected to support rental growth and capital appreciation for well-positioned owners.

However, the report cautioned that challenges persist. Elevated construction costs, planning delays and intensifying competition for power and grid access — especially for data centre developments — require a more discerning investment approach. Savills added that the performance gap between prime and secondary assets is likely to widen further.

According to Savills, the strongest upside opportunities lie in urban infill assets, value-add repositioning strategies and ESG-led upgrades, which can future-proof assets while enhancing income growth. Early movers in cold storage and data centres, particularly in under-institutionalised or undersupplied markets, are also well placed to secure long-term competitive advantages.

“Australia’s industrial and logistics sector is positioned for continued outperformance, supported by demographic growth and consumption tailwinds,” Savills said. “Strategic, ESG-led investment focused on supply-constrained, high-growth locations will define success in the next cycle.”