Melbourne prime logistics market steady in 2025 as vacancy edges higher

Vacancy rose to 5.3% in Q4 amidst a quality migration trend.

Melbourne’s prime logistics market closed 2025 on stable footing, with leasing volumes broadly tracking long-term averages even as vacancy edged higher and investment activity softened, according to JLL.

JLL reported that gross take-up totalled 287,200 sqm in the fourth quarter, reflecting steady occupier demand across the year. Manufacturing led leasing activity, accounting for 34.1% of gross take-up, followed by transport, postal and warehousing at 22.1%, and retail trade at 12.6%. Demand remained heavily concentrated in Melbourne’s West precinct, which captured 70% of quarterly take-up, reinforcing its position as the city’s core logistics hub.

New supply reached 244,700 sqm during the quarter, up 37% from the previous period. Notably, 68.3% of new stock was absorbed on completion — the highest absorption rate recorded in 2025 — as pre-commitment levels improved and speculative development commencements slowed. Despite this, Melbourne’s headline vacancy increased to 5.3%, driven by rising secondary vacancy and unabsorbed speculative stock in the South East precinct. JLL noted this reflects an ongoing quality migration trend, with tenants moving from secondary assets into super prime facilities.

Rental growth remained relatively stable across most precincts. According to JLL, prime and secondary net face rents were largely steady, except in the City Fringe where net face rents increased and incentives tightened. In contrast, average incentives rose across all grades in the South East, weighing on net effective rental growth.

On the capital markets front, JLL highlighted that investment volumes continued to decline, reaching AUD 567.0 million — the lowest quarterly total since Q1 2020. Investors have shown a preference for other key east coast markets, although the South East precinct still accounted for 55% of transaction volumes.

Looking ahead, JLL expects yields to remain stable in the near term amid uncertainty surrounding the cost of debt and sovereign risk. Net effective rental growth is forecast to recover following a period of revision through 2025, as incentives stabilise in the North and West precincts. Supply levels are also anticipated to moderate, with fewer speculative projects commencing, although developers remain focused on medium- to long-term demand drivers, including population growth and future logistics requirements.