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Industry projections show that annual demand of 3.3 million square metres in the industrial and logistics (I&L) sector through 2030 could result in significant supply shortage and unlock new opportunities for rental growth.
The latest research from Colliers has projected that demand from essential segments of the economy, such as manufacturing, trade, demographic change and consumption, will reach 3.3 million square metres annually through to 2030, requiring a 20 per cent market expansion by the end of the decade.
Managing director of industrial and logistics at Colliers, Gavin Bishop, noted that Australia’s I&L sector had undergone a “fundamental structural shift in demand”, establishing a new baseline for space usage driven by “surging online retail penetration, rising healthcare expenditure, expanded trade flows, and the integration of advanced technologies fuelled by robust population growth”.
The firm noted that every $1 billion increase in online retail sales results in a corresponding demand for 300,000–350,000 square metres of specialised third-party logistics or fulfilment industrial space.
Similarly, every $1 billion increase in health expenditure was stated as creating the need for 5,500–6,000 square metres of temperature-controlled facilities to store medical and pharmaceutical products.
With significant future demand projected, Colliers noted that there’s only 16 million square metres of new industrial space currently in the pipeline due to the present constraints on land availability.
Although Bishop acknowledged the slight uptick in Australia’s industrial vacancy rates, he noted they still “remain among some of the lowest globally, reinforcing the sector’s resilience in Australia”.
As a result of the 3.3 million square metres’ demand per year, the director highlighted that the ongoing land supply constraints are expected to restrict take-up capacity, likely leading to a “revived supply-demand imbalance by 2029, which is expected to catalyse another rental growth cycle”.
While the supply cycle and broader economic cycles are expected to continue in 2025, the firm stated that an anticipated rebound in economic growth and trade volumes is likely to boost demand for essential I&L facilities.
This renewed activity is then expected to counteract market fluctuations in 2025, helping demand to stabilise by 2027 as the market enters a more balanced phase.
The firm highlighted the projected demand in the latter half of the decade in noting that supply constraints are likely to emerge by 2029, provided enough new supply is available. However, Colliers cautioned that elevated construction costs and rising growth rates could complicate this outlook.
Looking towards the future, national director, industrial advisory at Colliers, Peter Evans, noted that these anticipated supply constraints underscore the importance of “development practices and efficient space utilisation”.
“As the market tightens, there may be increased focus on innovative building designs that maximise usable space while minimising environmental impact, aligning with the broader trend towards sustainability in the I&L sector,” Evans said.
Nonetheless, manager of research at Colliers, Chen Lu, emphasised that industrial and logistics-based demand from essential economic segments is “fundamental to the future growth of Australia’s I&L market”.
“Significant infrastructure and urban planning support will be required to keep pace with these developments. Without such advancements, the shortage of I&L space could pose a vulnerability to the national supply chain, creating bottlenecks that hinder population growth and economic expansion,” Lu said.
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