Demand slows as economic uncertainty continues

• Consumer demand in New South Wales (NSW) is recovering after an extended period of low spending. The NSW monthly household spending index increased 5.4% y-o-y (October 2025). However, spending on services still outpaced spending on goods, dampening industrial demand.
• Quarterly gross take-up in Sydney decreased to 136,100 sqm in Q4 2025, with leasing activity occurring predominantly in the existing warehouse market. Pre-lease take-up accounted for 30.9% of the quarterly total (42,100 sqm).

Supply slows as pre-lease demand continues to moderate

• Quarterly supply reached 113,300 sqm in Q4 2025, bringing 2025 annual supply to 595,800 sqm, 45.1% lower than 2024. All Q4 2025 supply was completed in the outer western precincts, with the largest proportion completed in the Outer Central West (61,372 sqm, 54.2%).
• A combination of occupier consolidation, sub-lease offerings and speculative supply resulted in increased vacancy across most precincts in Q4 2025. Total headline vacancy increased by 0.8 percentage points to 5.8%.

Transaction volumes dip but yields tighten

• Average prime net face rents remain broadly unchanged across all precincts in Q4 2025, limited by the volume of executed leasing deals.
• Transaction volumes in Q4 2025 slowed as acquisitions of large-scale assets paused over the last three months of the year. A total of 659.8 million, down from AUD 2.1 billion recorded in Q3 2025.

Outlook: Supply accelerates

• Supply levels are expected to improve over the next 12 months, with 1,385,700 sqm of new warehouse space forecast to be completed. This supply is supported by a healthy level of precommitment (58%) in under-construction stock.
• Moderate rental growth of between 2.5% and 3.0% is expected over the next 12 months. This, coupled with a continuation of the yield compression cycle, will support improved capital values in 2026.