Australia’s industrial leasing pivots back to new builds

Thanks to a strong development pipeline for 2026.

Leasing activity in Australia’s industrial sector is shifting back toward new-build facilities, supported by a strong development pipeline heading into 2026 and sustained demand for large-format logistics assets, according to Savills Australia.

In its latest industrial market update, Savills said developer confidence remains firm, particularly in Brisbane and Melbourne, where new supply is being brought forward to meet occupier demand. The consultancy noted that speculative development is increasing across key industrial precincts, including Sydney’s West and South West, Melbourne’s West and South East, and Brisbane’s Trade Coast and Western corridors.

This renewed focus on new construction reflects persistent demand for modern, large-scale facilities. Savills reported that vacancy rates for industrial buildings larger than 20,000 sq m now average 3.5%, tightening from 3.7% in the previous quarter and 4.2% a year earlier, underscoring continued competition for high-quality space.

“Despite broader economic uncertainties, demand for large-format logistics assets remains robust,” Savills said, pointing to occupiers’ preference for modern specifications, higher clearances and efficiency-driven layouts.

At the same time, elevated construction costs and increasingly stringent environmental, social and governance (ESG) requirements are influencing development and investment strategies. According to Savills, these factors are driving greater interest in value-add repositioning and redevelopment, particularly for older industrial assets.

With mandatory climate-related financial disclosures set to be phased in over the coming years, Savills said assets undergoing ESG-led upgrades are well positioned to benefit from rental uplifts, often at comparatively lower capital costs than ground-up development.

The report also highlighted an acceleration in capital rotation across the sector. Funds are increasingly divesting non-core industrial holdings to redeploy capital into segments aligned with long-term structural drivers, including logistics, data centres and cold storage.

“These sectors are supported by enduring themes such as population growth, evolving consumption patterns and supply chain transformation,” Savills noted, adding that investor appetite remains strongest for assets offering future-proofing and operational resilience.

Looking ahead, Savills expects leasing momentum to remain concentrated in well-located precincts with access to transport infrastructure and labour pools, while ESG compliance and asset quality will continue to play a growing role in occupier and investor decision-making.