Sydney Industrial Property Market Review - August 2025
“Tenants are in a stronger negotiating position than at any time in recent years.”
Market Overview
Sydney’s industrial property market continues to experience a shift in momentum, with demand from occupiers softening while supply levels rise across most sectors. The once frenzied pace of leasing activity has slowed considerably, replaced by a more measured and cautious approach from both occupiers and investors.
Decision-making timelines have extended as businesses evaluate economic uncertainty, with many adopting a “wait and see” approach. This is in stark contrast to the climate of just 12–18 months ago, when the fear of missing out drove rapid commitments and more aggressive deal structures.
Leasing Market
Occupier enquiry levels remain subdued, particularly in the larger-format space of 2,500 sqm+ facilities. Negotiation periods are stretching longer as tenants leverage increased options in the market to push for more favourable leasing terms.
While headline face rents have held steady for institutional-grade assets, the story beneath the surface is changing. Incentives are now on the rise, a direct reflection of heightened competition among landlords to secure strong covenant tenants. This shift places tenants in a stronger negotiating position than at any time in recent years.
Supply & Stock Levels
Following a post-Covid period of constrained supply, the pipeline of new developments reaching completion, combined with secondary stock coming back to market, has materially lifted the volume of leasing options available. This increase in stock has been a key driver of the upward pressure on incentives, as landlords look to differentiate their offerings in a crowded market.
Sales Market
The investment market has also cooled, with both private investors and institutional capital showing greater hesitancy. Broader macroeconomic concerns – including interest rate stability, inflationary pressures, and global economic uncertainty – are weighing on sentiment.
Investors and owner-occupiers alike are now taking longer to complete due diligence, carefully scrutinising assets rather than pursuing acquisitions with urgency. While this has reduced transactional volumes, it has also reinforced the importance of high-quality, well-located industrial assets that can demonstrate resilient tenant demand.
Outlook
Looking ahead to Q4 2025, we anticipate:
• Sustained upward pressure on incentives as competition for tenants continues.
• Stable face rents in prime assets, though secondary stock may face downward rent adjustments.
• Sales activity to remain subdued, with a flight to quality favouring core industrial assets with long WALEs and strong tenant covenants.
• Increased tenant leverage, particularly in the 2,500+ sqm category, where options are most plentiful.
While the market is clearly softening, opportunities remain for well-prepared occupiers to secure favourable terms and for investors to acquire assets at more compelling yields than were available during the peak of the cycle.
Artie Kalpidis, Link Property Services