A new report into the state of the commercial property market has revealed industrial assets continue to attract buyers, with rising rents and valuations driving yields down across most of the country.
The inaugural realcommercial.com.au and PropTrack Commercial Property Update shows industrial assets also remain front of mind for buyers, with most enquiries and the most-viewed listings skewing towards the asset class.
The report shows a mixed picture for two other major asset classes – office and retail – in terms of vacancy rates and yields.
Industrial was the only asset class to see yields move lower in every capital city over both the quarter and the year ending March 2026. Yields and valuations have an inverse relationship.
Yields are compressing across many locations and sectors. Picture: PropTrack
Out of the top 10 most-viewed properties on Real Commercial for the first six months of 2026, five were industrial.
As for enquiries, all of the top 10 were industrial. Seven of them were in Western Australia.
This coincides with WA industrial yields compressing strongly, with Perth’s down 37% and the rest of the state’s down 69%, signifying investor optimism for the state and sector.
Anne Flaherty, PropTrack senior economist and report author, said it comes down to e-commerce, and companies onshoring logistics in the wake of Middle East tensions.
The growing popularity of data centres, too, is fuelling demand for industrial sites, particularly on the fringes of cities and in regional locations.
While the other two major asset classes get the headlines – with big box retail’s strength well-documented, along with the much-maligned recovery for offices – industrial has remained the consistent outperformer since the Covid-19 pandemic.
“While industrial assets aren’t necessarily as flashy as retail centres or CBD office towers, investors looking for strong fundamentals are drawn to the sector,” Ms Flaherty said.
“Industrial vacancy rates hit record low levels in 2023, which drove double digit rent growth in many markets around the country.”
Despite this, Ms Flaherty noted the broader commercial property market has experienced a subdued start to 2026, with transaction activity slowing following the recovery seen last year.
“Higher financing costs have weighed on acquisition activity, while rising unemployment and ongoing uncertainty have added to investor caution,” she said.
“Despite these headwinds, some sectors continue to outperform, particularly those with exposure to defensive industries such as healthcare, childcare, and essential retail.”
In May, Knight Frank also released its Q1 industrial review, which found the constrained supply pipeline should support further capital growth.
This year industrial completions are forecast to fall a further 20%, following a 19% decline in 2025.
Total new supply across the east coast fell to 2.1 million square metres in 2025, and in 2026 there is 1.66 million square metres of new supply forecast.
As for leasing, the report found pre-commitments accounted for 22% of all activity through the year, and that major new sites from Kmart and Aldi in Sydney and Melbourne had the ability to shift the dial quickly, albeit with a slower start this year.
While vacancy rates recorded a slight uptick, Michael Kwok, Knight Frank head of capital markets Australia, expects this to be absorbed quickly.
“Structural drivers, including e-commerce growth, supply chain reconfiguration and infrastructure investment will support occupier demand, while ongoing supply constraints are expected to underpin rental growth and occupancy levels,” Mr Kwok said.
Ms Flaherty said that while vacancy rates had ticked up in industrial, they remain lower relative to office and retail spaces.
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