Conditions in Melbourne’s industrial market are likely to strengthen in 2026, with limited new supply expected over the next two years.
The firm’s latest Melbourne Industrial State of the Market report found new supply in Melbourne’s industrial market is forecast to total 584,000sq m in 2026, down 20% from 2025.
Approximately 85% of this supply is pre-committed, resulting in limited speculative warehousing coming to the market this year.
“Development activity is forecast to slow markedly in 2026 and 2027,” said Dr Tony McGough, Knight Frank Partner, Head of Research & Consulting, Victoria.
“Vacancy in Melbourne’s industrial market rose further in the last quarter of 2025, up by 0.5% to 4.1%, however incentives remained stable and take up was resilient,” he said.
“We expect this stable demand and falling supply to underpin market conditions this year, with Melbourne’s industrial market expected to strengthen.”
The Knight Frank research found prime net face rents in Melbourne’s industrial market remained flat over the last quarter of 2025, but rose by 4.4% over the year.
Knight Frank Partner, Head of Industrial Logistics in Victoria Joel Davy said: “Melbourne’s west had the strongest take up over the last quarter of last year, up 18% to 109,000sq m, with vacancy falling to 4.6% from 4.8% but up from 4.0% in Q4 2024.
“This precinct also saw supply fall markedly over 2025, with a 68% reduction from 2024 though it still added 208,000sq m.
“The Southeast has the lowest vacancy at 3.7% but strong supply additions over 2025, with 366,000sq m of warehousing added to the market, saw this rise from 2.3% in the previous quarter.
“However new supply in this precinct is expected to fall markedly in 2026 with only 84,000sq m of warehousing expected to reach completion.”
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