Sydney industrial occupier demand up 16.8% to 342,000sqm in Q1

This is well above the quarterly average over the past decade.

According to a JLL report, occupier demand in Sydney’s industrial market increased 16.8% over the quarter to 342,000 sqm, 44.3% above the ten-year quarterly average, driven by a recovery in pre-lease activity, which accounted for 68.9% of area leased.

Leasing of existing stock decreased 39.1% quarter-on-quarter and was 32.1% below the ten-year quarterly average.

Here’s more from JLL:

Sydney recorded 43,200 sqm of completions in Q1 2025, 72.5% below the ten-year average and the lowest level recorded since Q1 2021, as several anticipated completions were delayed to next quarter.

JLL is tracking 952,000 sqm of supply currently under construction, of which 39.5% is pre-committed.

Yields compression cycle begins in most Sydney industrial precincts

Most precincts recorded rent uplifts in Q1 2025; however, this primarily stemmed from basket adjustments and enhanced stock quality, rather than demand-driven factors.

Following elevated activity in Q4 2024, investment volumes moderated to AUD 688.2 million, 2.2% below the ten-year quarterly average.

Outlook: Yield compression may continue

We anticipate that elevated speculative supply and sublease availabilities will exceed demand, with vacancy expected to increase further, constraining effective rent growth.

Strong underbidder activity in the investment market suggests that investor demand remains strong and may support further yield compression over 2025.