
Australia’s industrial property sector is booming with a $33.3 billion investment in warehousing over the past five years, driven by businesses embracing green initiatives, according to a new report from Savills Australia
The report highlights how the adoption of renewable energy and advanced manufacturing is fueling demand for industrial space nationwide.
This surge in investment reflects a broader trend toward sustainability, aligning with government commitments to achieve net-zero emissions by 2050.
The industrial sector is poised to play a critical role in supporting this transition through increased adoption of renewables, electric vehicle technologies, and energy storage systems.
Earlier this month, the government announced it will create the Future Made in Australia Act which it hopes will revitalise manufacturing in Australia, led by net zero goals. More details are expected to be announced in the Budget.
“We will bring together in a comprehensive and co-ordinated way a whole package of new and existing initiatives,” Prime Minister Anthony Albanese said in announcing the policy.
“To boost investment, create jobs and seize the opportunities of a future made in Australia.
“We want to look at every measure that will make a positive difference.
“Investing in new industries – and ensuring that workers and communities will share in the dividend.
“That means giving the new Net Zero Economy Authority every tool it needs to support resource communities in particular through the coming period of economic change.”
Over 10,000,000 square meters of new industrial space has been added to East Coast markets since 2019.
“While industrial demand has historically been driven by warehousing and logistics, manufacturing is poised to see a greater focus going forward. With a strong policy framework and increasing investor interest, this rebound is poised to reshape Australia’s industrial property market for years to come,” said Katy Dean, Head of Research at Savills Australia.
While global industrial investments dropped by 39 per cent in 2023, Australia’s industrial sector saw a smaller decline of 35 per cent, with investment volumes significantly higher (56 per cent) compared to the pre-pandemic average.
Savills predicts that increasing domestic manufacturing capacity will drive demand, reducing vacancy rates and pushing rents higher.
“Following an unprecedented three-year growth period, marked by face rents soaring up to 80 per cent in select markets and vacancy rates at below one per cent, there has been a significant surge in capital-seeking investment opportunities in the industrial sector,” said Michael Wall, National Head of Industrial & Logistics at Savills Australia.
There have been renewed efforts from state governments as well to accelerate a manufacturing rebound.
Victoria, South Australia and Queensland are the most recent to lead this charge, with 10-year roadmaps to improve their manufacturing capabilities.
Recently the Victorian Government on-sold the bulk of the former CSL manufacturing site to Zoetis for $350 million, with the deal incorporating sovereign manufacturing capabilities. In South Australia, construction has started on a $100 million facility for Noumed Pharmaceuticals, which will receive up to $20 million in funding from the federal government.
According to Savills, these projects have the potential to transform underutilised and secondary industrial precincts, while expanding industrial use into future growth corridors. It may also shift both occupier and investor perceptions of the location, and redirect demand from traditional core areas with little vacancy.