Australian industrial market enters reset phase

The Australian industrial and logistics market is entering a new phase, transitioning away from the speculative supply boom seen after COVID-19, when developers reacted to the market dynamics of high demand and very low vacancy. In turn, have once again responded as the market navigates peaking vacancy and economic challenges.

The post COVID-19 supply boom period from Q4 2022 to Q1 2025 delivered a sustained rise of industrial and logistics developments commencements of which, both the level and proportion of speculative versus pre-committed assets significantly increased. Across Q1 2020 to Q3 2022, quarterly speculative development starts averaged 186,000sqm (35% of total starts). This increased precipitously, with the quarterly average of speculative starts more than doubling in volume to 390,400sqm across Q4 2022 to Q1 2025 and proportion rising to 57%.

During this period, 3.9 million square metres of speculative development commenced, highlighting developer confidence in Australia’s industrial market, as rolling annual national net effective rental growth peaked at 32.8% during this period. 

Construction starts data shows a dramatic decline from Q2 2025, unequivocally aligned with net effective rental growth turning negative, as quarterly speculative starts dropped back to just north of the seen pre-boom. As net face rental growth remains minimal and heightened incentive offerings continue to hinder net-effective rental growth; Combined with tightening financial conditions, total quarterly development starts remain subdued. Construction starts are continuing to decline with the low activity levels across H1 2026 not seen since government-mandated lockdowns.

Figure 1: Australian industrial and logistics construction starts, 2020-2026

Source: JLL Research, Q2 2026

Despite still recording speculative activity in line with historic averages over the last 15 months, pre-commitment of assets prior to commencement is heavily favored, with a large proportion of speculative development starts linked to adjacent pre-committed developments. This is particularly evident in smaller markets like Perth and Adelaide compared to larger and more dynamic East Coast markets. Recent speculative development starts in these burgeoning markets have been concentrated in emerging outer suburbs such as Pakenham and Cranbourne West in Melbourne’s South East precinct, and Yatala in Brisbane’s Southern precinct. In Sydney, speculative construction starts are centralised to new estates in outer suburbs of the Outer Central West such as Kemps Creek, Eastern Creek and, in line with the upcoming Western Sydney Airport opening, Badgerys Creek.

While high proportions of new stock are still completing in key markets across the country, affecting headline vacancy levels, this is only a near-term headwind for the sector as the last of heightened levels of speculative starts mirrors completion dates in H2 2026. Understanding development trends, start dates and construction timeframes show that supply dynamics within the Australian industrial market will moderate, promoting positive returns out of a low-rent growth cycle for investors.