Sydney’s Industrial Market Sees Yield Compression for the First Time Since 2021

Investor confidence in Sydney’s industrial market has led to yield compression in Q2, according to the latest research from Knight Frank. 

The firm’s Sydney Industrial State of the Market Q2 2025 report found yields had tightened for the first time since 2021, with both prime and secondary yields compressing by 7.5 basis points. 

Transaction volumes in Sydney’s industrial market were $876 million in Q2, including the completion of Centuria and investment manager BGO’s joint acquisition of three Western Sydney warehouses worth $201 million, providing around 45,000sqm of prime industrial space. 

Knight Frank Associate Director Research and Consulting Marco Mascitelli said transaction volumes were down slightly from Q1, when $936 million in transactions was recorded, however activity is expected to pick up over the remainder of the year. 

“Investor momentum is likely to pick up further over the second half of the year,” he said. 

“We have passed the cyclical bottom of the market, with investors increasingly returning to the market as confidence returns, and further expected interest rate reductions will spur activity on.” 

Knight Frank Head of Industrial Investments Angus Klem said: “The outlook for Sydney’s industrial investment market is very positive, with the RBA expected to cut rates through 2025, improving liquidity and investor appetite.  

“Investors, therefore, anticipate yield compression and upside from asset revaluation.  

“We anticipate a positive shift in transactional volume.” 

Recent activity in the market includes the Stockland-Boyd joint venture, worth an estimated $3.5 billion to develop a circa 340,000sq m logistics hub adjacent to the Sydney airport, Hong Kong-based Link Real Estate acquiring industrial facilities to the tune of $121 million, Manulife also taking a $50 million-plus position in Western Sydney from Centennial/KKR, and RE Corval launching an industrial infill trust underpinned by their recent $100m+ acquisition in Girraween and Wyong with a long-term lease back to a major poultry provider.