Gross take-up slows as economic uncertainty continues

• After four consecutive quarters of strong activity, demand slowed in Q1 2026 as global economic uncertainty challenged occupier sentiment and operating conditions. Quarterly gross take-up decreased 53.5% to 199,200 s.qm., 20.0% below the 10-year average.
• Activity concentrated in the Outer Central West (30.7%), followed by the Outer South West (20.2%) and South Sydney (19.4%). The largest deal was Parratech’s 20,500 sqm lease in Wetherill Park.

Supply pipeline remains elevated, but commencements drop

• Supply delivery rebounded in Q1 2026, reaching 319,000 s.qm. Quarterly completions exceeded the 10-year average by 91.4%, all of which was delivered in the outer western precincts.
• The largest proportion of quarterly supply was recorded in the Outer Central West precinct (225,300 s.qm.), followed by the Outer South West (61,300 s.qm.) and the Outer North West (32,400 s.qm.).

Yields stable following 2025 compression cycle

• While vacancy was broadly stable, slowing demand has limited rental growth in Sydney in Q1 2026. The only quarterly increase was recorded in the Outer Central West (1.1% 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. Sales activity declined over the quarter to AUD 499.1 million, 28.3% below the 10-year average, while prime yields were unchanged across all Sydney precincts following two quarters of yield compression.

Outlook: Vacancy stabilising but further supply expected

• Demand is expected to slow in the short term as ongoing geopolitical uncertainty subdues occupier sentiment. While the pipeline for new supply remains strong, developers are increasingly 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.