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Development completions in Australia’s industrial market reached a record high in 2024, paving the way for greater divergence in vacancy rates and rental growth across the nation.
Knight Frank’s Australian Industrial Review Q4 2024 has revealed that the construction of new supply across the East Coast cities of Sydney, Melbourne and Brisbane is expected to reduce slightly this year, from 2.6 million square metres in 2024 to 2.3 million square metres in 2025.
The report noted that the record 2.6 million square metres of new supply delivered in 2024 has normalised vacancy rates and slowed rental growth in the industrial market.
Across the nation, Sydney is expected to have 887,000 square metres of stock this year, falling roughly in line with the 860,000 square metres of developments completed in 2024.
Over in Brisbane, the River City is anticipated to finish 567,000 square metres worth of stock in 2025, which will mark a decline from the 666,000 square metres of stock delivered in 2024.
Melbourne is expected to have 634,000 square metres of stock completed in 2025, representing a considerable 41.5 per cent decline from the 1 million-plus square metres of stock delivered in 2024.
Industrial vacancies return to normal levels
The report noted that development completions last year led to a tripling in vacancies within Australia’s East Coast cities to 2.2 million square metres in 2024.
While vacancy levels are now 33 per cent above the 10-year average for the industrial market, the combined vacancy rate for Sydney, Melbourne and Brisbane still only stands at 3 per cent.
Knight Frank partner, research and consulting in Queensland, Jennelle Wilson, said that vacancies in the industrial market are now back in line with long-term levels, after the extreme lows of 2022 and 2023.
The largest uplift in industrial vacancy over Q4 2024 was observed in Melbourne, where an additional 95,624 square metres of stock saw availability levels rise by 10.2 per cent, to now be 3.3 per cent at the end of the year.
Over the last quarter of 2024, Sydney’s industrial vacancy rate increased by 4.3 per cent over the period to now reach 2 per cent, while Brisbane’s vacancy fell by 4.7 per cent to now register as 4.3 per cent at the end of 2024.
Despite the rise in vacancies, the report noted that rental growth widely continued over Q4, with Adelaide recording the highest prime net rental growth of 12 per cent, followed by Brisbane (7.2 per cent), Melbourne (6.7 per cent), Perth (6.1 per cent) and Sydney (3.9 per cent).
Industrial rental performance already diverging
While rental growth is broadly ongoing across the nation, Knight Frank observed that there has been a “deepening divergence in performance depending on location and supply levels”.
Across the East Coast cities, the report showed that rental growth in Q4 was driven by only one or two precincts – such as South Sydney, East Melbourne and TradeCoast/North Brisbane – while rents were flat in the others.
Knight Frank’s national head of industrial logistics, James Templeton, said tighter vacancy rates across the East Coast cities had translated to higher prime net effective rent growth in 2024.
“In Brisbane, the sought-after TradeCoast has seen significant rental growth of 14 per cent, with a vacancy rate of 3 per cent, while in the South, where vacancy is 7.5 per cent, rents have risen by just under 3 per cent,” he said.
Templeton said the trend was also across the other East Coast cities.
Sydney’s South market recorded the tightest vacancy rate across the city in Q4 (0.9 per cent), and also notched up the highest prime net effective rental growth (8.1 per cent) in Sydney for the year of 2024.
“We are seeing a very similar story in Melbourne, where the east has the tightest vacancy and rents have risen by more than 7 per cent, while in the west and north rents have risen at a lower rate due to higher vacancy,” Templeton said.
In the first half of 2025, Wilson said that there was potential for vacancies to rise further due to “relatively subdued demand” and the ongoing completions flowing through the market.
Wilson noted that the balance of the industrial market and vacancy levels are expected to improve over the year.
“After projects under construction are completed, we expect speculative construction to fall away in the second half of the year as developers become more conservative.”
“This will assist to return market balance and stabilise vacancy levels during 2025,” Wilson said.
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