Sydney Industrial Market Dynamics Q2 2026

• Gross take-up volumes rebound.
• Pre-commitment demand increases while completions fall.
• Continued yield and vacancy stability.

Following global economic uncertainty suppressing gross take-up volumes in Sydney industrial market in Q1 2026, demand rebounded in Q2 2026. Gross take-up increased 56.5% to 323,300 sq.m., 28.9% above the 10-year average. Activity concentrated in the Outer Central West (67.9%), followed by the Outer North West (20.2%) and the Outer South West (7.9%). The largest deal was Toll’s 30,600 sqm sublease at 10 Buda Way, Kemps Creek.

Supply deliveries decreased in Q2 2026 to 155,500 sq.m., down 51.3% from 319,000 sq.m. in Q1 2026, and 10.2% below the 10-year average. The largest proportion of quarterly supply was recorded in the Outer Central West precinct (77,000 sq.m.), followed by the Outer North West (14,900 sq.m.) and the Outer South West (14,200 sq.m.).

Elevated vacancy and prolonged occupier decision making timelines have stalled rental growth in Sydney in Q2 2026. The only quarterly increase was recorded in the Outer North West (0.6% quarter-on-quarter), with average rents in the other precincts unchanged. Midpoint incentives increased marginally as property owners look to combat uncertainty and secure tenants in their portfolios. Investment activity increased over the quarter to AUD 1.2 billion, 90.9% above the 10-year average, while prime yields were stable across all precincts for the second consecutive quarter, following compression in the second half of 2025.

Continued uncertainty in the business environment is anticipated to prolong expansionary occupier decisions in the short term. While the pipeline for new supply remains strong, developers are prioritising pre-commitments before commencing construction. Face rent growth is expected to moderate as property owners look to secure tenants in their portfolios, with incentive growth likely near its ceiling. More positively, investor demand remains strong, although further yield compression is not expected in the short term.