Normalising occupier demand

• Occupier activity was constrained in Sydney’s industrial market, with 229,700 sqm of gross take-up recorded, less than the ten-year quarterly average of 237,300 sqm.
• Pre-lease activity remains subdued, with 27.3% of leasing volume by area being pre-lease agreements compared to the ten-year quarterly average of 38.0%.

A spike in completions

• In Q3 2024, 420,000 sqm of new industrial stock was completed in Sydney, the second-highest level of quarterly completions since JLL began tracking the market, and after the peak in Q2 2022.
• JLL is tracking 633,600 sqm of supply currently under construction, of which 48.4% is pre-committed. Of the under-construction supply, 53.3% will be delivered to the Outer Central West.

Subdued rent growth with increasing incentives

• In Q3 2024, rent growth continued to flatten and incentives increased as vacancy continued to normalise. Notably, South Sydney recorded no increase in rents for the first quarter since Q1 2021.
• Transaction volumes reached AUD 761.6 million in Q3 2024, down 45.8% from Q2 2024. There were four significant sales (over AUD 50 million) recorded in Q3 2024 compared to eight in Q2 2024.

Outlook: Flattening rent growth

• Face rent growth is expected to remain flat alongside a continued uplift in incentives as lower occupier demand and increasing supply heightens vacancy risk for industrial landlords.
• We anticipate investment yields to remain stable over the next 12 months before commencing a decompression cycle.