Industrial is the strongest asset class in commercial real estate

While office and retail markets spent several years recovering from pandemic-related disruption, industrial real estate barely paused. Vacancy rates have been declining since 2020 and now sit at historically low levels. Rents are rising faster than any other commercial property category. And the pipeline of new supply, while growing, cannot keep pace with current demand.

This report examines the drivers behind the industrial market's sustained strength and what it means for tenants seeking warehouse and logistics space.

The vacancy story

Metro-wide industrial vacancy now sits at 4.2% — the lowest level ever recorded in this market. To put this in context, a market is considered balanced at around 5–6% vacancy. Below 5% means tenants have very limited options and landlords have significant pricing power.

The tightest precincts are those with direct highway access and proximity to port facilities. In these locations vacancy is effectively zero — every available unit is either leased or under offer within days of coming to market.

What is driving demand

Three structural forces are driving industrial demand in 2026. The first is the continued growth of e-commerce. Online retail now accounts for over 22% of total retail sales and every percentage point of growth translates directly into demand for fulfillment and last-mile delivery space.

The second driver is supply chain restructuring. Following the disruptions of 2021–2023, businesses across all industries are holding more inventory and building redundancy into their supply chains. This requires more warehouse space per unit of revenue than the lean just-in-time model that dominated pre-pandemic thinking.

The third driver is the growth of cold chain logistics. Temperature-controlled warehousing for food, pharmaceutical, and healthcare products is one of the fastest-growing segments of the industrial market and commands a significant rental premium over conventional warehouse space.

Rents are rising fast

Average industrial rents across the metro region increased 18% year on year in the 12 months to Q1 2026. This is an extraordinary rate of increase for an asset class that historically moved slowly. For context, industrial rents increased by approximately 3–4% per year in the decade prior to 2020.

The sharpest increases are in the 5,000–15,000 sqft size range — the most popular bracket for small to medium logistics operators, e-commerce businesses, and light manufacturers. Units in this size range in prime locations are now achieving rents that would have seemed implausible three years ago.

What Tenants Should Do

For businesses with industrial space requirements, the message is clear — move quickly. The combination of record-low vacancy, rising rents, and a constrained supply pipeline means that waiting will not improve your position.

Businesses with lease expiries in the next 12–18 months should begin their search now. Leaving renewal or relocation to the last 6 months risks being caught in a market with very limited options at significantly higher rental levels.

The supply pipeline

New industrial supply is coming to market but not fast enough to relieve current pressure. Approximately 2.4 million sqft of new industrial space is under construction across the metro region with completion dates spread across 2026 and 2027. This will provide some relief in certain precincts but is unlikely to shift the market from undersupplied to balanced in the near term.

Pre-lease activity on new developments is strong — in many cases entire new facilities are fully committed before practical completion. For tenants with flexibility on timing and location, pre-leasing a new development can be an effective strategy to secure quality space at agreed rental levels before the broader market tightens further.