Melbourne industrial leasing activity stayed elevated in Q2 2026 while speculative construction activity remained subdued.
05 August 2026
Insight
05 August 2026
Melbourne Industrial Market Dynamics Q2 2026
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Authors
Katherine Lutze
Key Melbourne industrial market trends:
- Demand remains elevated, significantly above long-term averages for the second quarter of 2026.
- New supply is subdued reflective of a pullback in speculative construction.
- Yields were stable across all precincts in the prime grade as domestic investor sentiment remains largely positive for the Melbourne market despite ongoing headwinds.
Melbourne industrial occupier demand
Leasing activity in Melbourne in Q2 2026 was significantly above long-term averages, with gross take-up totaling 443,100 sqm, bringing H1 2026 volumes to already 70.8% of 2025 take-up. Demand led by transaction activity the West, accounting for half of quarterly volumes. Manufacturing was the dominant occupier sector, followed by transport, postal and warehousing and retail trade.
Melbourne industrial supply pipeline and rental growth
New supply delivered in Q2 2026 was well below long-term averages, totaling 117,000 sqm, reflecting the significant pullback in speculative construction across Melbourne. Despite this, only 29.1% of space delivered was absorbed upon completion, driven practical completion on multiple speculative projects in the South East and West precincts. There is currently 831,500 sqm. under construction of which 68.4% is pre-committed. Projects in the supply pipeline with planning approval are expected to remain largely conditional on pre-lease commitments before commencing.
Net face rental growth was mixed across precinct and grade across the Melbourne market, with a decline in secondary net face rents in the North and South East precincts as occupiers take advantage of elevated incentives offered on prime space and upgrade accommodation. Net face rental growth increased in the West and City Fringe precincts across both grades. Investment activity was elevated in headline terms, largely due to one significant transaction, with underlying volumes of AUD $569.1 million on par with the long-term quarterly average. Prime yields were stable, while secondary yield mid-points declined in the North and South East precincts.
What is the outlook for the Melbourne industrial market?
Due to easing speculative supply levels, incentives are expected to begin to decrease as vacancy declines within the market, ultimately promoting net effective rental growth in prime and pre-lease markets, and follow into the secondary grade in the medium-term.