Why Australia's industrial property sector is impossible to ignore
Rising demand, constrained supply and ever-increasing replacement costs are creating a compelling proposition for industrial property investment, according to Westbridge Funds Management.
Every time an online shopper clicks ‘buy now’, a warehouse gets busier.
And every time an Australian saves their phone data to the cloud, it’s likely a data centre somewhere is doing the heavy lifting.
That same pressure is building across the entire industrial property spectrum, driven by Australia’s growing trade ties with Asia-Pacific partners and a $22.7 billion Federal Government investment in advanced manufacturing.
For investors who have built their wealth through residential property, the fundamentals behind industrial property are a compelling reason to diversify their portfolios.
Industrial investments come with several advantages – longer lease terms, generally higher yields, and demand underpinned by macroeconomic forces rather than sentiment or emotion.
The data behind Australia’s industrial demand tells a long-term story.
Research from Colliers shows every $1 billion increase in online retail sales translates to an additional 300,000 to 350,000sqm of industrial space required.
At the same time, Australia’s online retail share remains significantly below that of the United States and the United Kingdom, indicating there’s a long runway of growth still to come.
Deepening trade ties across the Asia-Pacific are adding to the growth pressures, with Colliers’ estimates showing every 1,000 additional sea containers moving through Australian ports require between 8,000 and 13,000sqm of industrial space to support them.
Outside of e-commerce and logistics, a relatively new entrant to the industrial property sector is also supercharging demand for space.
Data centres are increasingly boosting national industrial demand, driven by factors including the rapid growth in data creation and storage needs, the expanding use of cloud computing services, and ongoing technological advancements such as AI.
Overall, Colliers has estimated Australia will need 20 per cent more industrial and logistics space by 2030, equating to an additional 96.4 million sqm of space just to keep pace with population growth.
While developers are mobilising to unlock new supply, the challenge remains in keeping up with the sustained growth in demand.
Vacancy rates across Australia’s key industrial and logistics sectors sit around 3.2 per cent, according to CBRE analysis.
Of the new stock being delivered, Colliers reported 75 per cent was pre-committed as of Q4 2025, meaning tenants had secured their space before the buildings were complete.
Against a backdrop of rising construction costs acting as a constraint on new development, and sustained increases in demand for industrial land, the opportunity for investors often lies in existing assets.
With established precincts in key industrial locations already largely built-out, properties that are under-rented, underutilised, or in need of an upgrade offer a faster and more cost-effective path to returns than new development.
Sites sitting on large parcels of land are another opportunity, with the potential to reposition the asset at lease expiry.
Knowing what to look for in industrial property
The first step is understanding how industrial property works. The next is knowing how to navigate it as an investor.
Start by evaluating the asset’s leasing profile. A long weighted average lease expiry provides certainty, but it’s not necessarily the only metric you should evaluate.
Assets that are leased at below-market rates can actually be more valuable as they have upside waiting to be unlocked when leases expire and rents are reset to current market rates.
Yields are another important consideration. Investors are naturally attracted to high yields, but they can often reflect something the market has already priced, either a short remaining lease term, maintenance that has been deferred, or a poor location.
Replacement costs are another consideration. Construction costs continue to climb, giving existing assets in established precincts a structural valuation floor that provides downside protection in markets where new supply is constrained.
Finally, consider your competition. At the large end of the industrial market, you’ll find yourself up against institutional capital, even if you’re buying through a managed fund.
Assets in the $10 million to $40 million range, however, typically sit below the institutional radar while remaining beyond the reach of most individual buyers.
For investors accessing this range via a managed fund, the combination of thinner competition and genuine value-add potential makes for a compelling proposition.
