Western Sydney dominates Industrial Investment – RWC Western Sydney

Over the past decade, Western Sydney has accounted for more than 58% of all industrial property sales in the city, solidifying its position as the epicentre of industrial activity.

Ray White Commercial (RWC) Western Sydney’s latest report highlights the region’s continued dominance in Sydney's industrial real estate market.

Peter Vines, Managing Director of RWC Western Sydney, said Western Sydney's industrial sector continues to demonstrate resilience and significant long-term growth potential, supported by strategic infrastructure developments and a diverse range of demand drivers.

“A critical factor in Western Sydney’s market dynamics is the limited availability of land, particularly in the inner and central western regions. These supply constraints have played a significant role in driving up land values and rental rates, making these areas some of the most competitive in the industrial market.”

While land scarcity presents challenges, it also creates opportunities for infill projects, particularly in key suburbs such as Lidcombe, Rosehill, and the North West sector, where substantial infrastructure investments are transforming the landscape.

Vines said the outer west and southwest precincts, including Kemps Creek, Marsden Park, and Badgerys Creek, are emerging as key growth areas with considerable potential for new supply.

The report found that the availability of developable land in these regions is fostering significant industrial development, which is expected to continue over the coming years. These areas are poised to add 2-3 million sqm of new industrial space over the next five years, catering to the growing demand for logistics and distribution facilities.

Vines said Western Sydney's strategic importance, ongoing infrastructure improvements, and diverse demand drivers position it well for long-term growth.

“Investment trends in Western Sydney’s industrial sector are also undergoing notable changes. The report highlights a softening of investment yields from historic lows, with current yield ranges widening to 4.25% - 6.50% across different submarkets.

“This yield expansion reflects the market’s adjustment to higher interest rates and broader economic conditions. While institutional activity has slowed, owner-occupiers and private investors remain highly active, particularly for smaller assets.”

The report found rental rates, which have seen substantial growth in recent years, are now showing signs of moderation. The report indicates that rental growth rates are stabilising, with recent increases more modest compared to the double-digit growth previously experienced. Despite this moderation, the demand for industrial space remains strong, particularly for large distribution facilities and last-mile logistics assets, driven by the ongoing need for efficient logistics networks.

“Infrastructure projects, including the development of the Western Sydney Aerotropolis, continue to shape the region’s industrial sector, attracting significant interest from investors and developers alike. Although the initial e-commerce boom has moderated, the strategic importance of Western Sydney as a logistics hub ensures that demand for industrial space remains robust.”

“Despite the challenges posed by economic pressures such as interest rate fluctuations and inflation, the long-term performance of Western Sydney’s industrial market remains strong. Over 5- and 10-year periods, the region has consistently achieved impressive growth across key metrics, including land values, rents, and total returns. This performance showcases the region’s resilience and its continued appeal as a prime destination for industrial investment in Sydney.”

Over the past decade, Western Sydney has accounted for more than 58% of all industrial property sales in the city, solidifying its position as the epicentre of industrial activity.

Ray White Commercial (RWC) Western Sydney’s latest report highlights the region’s continued dominance in Sydney's industrial real estate market.

Peter Vines, Managing Director of RWC Western Sydney, said Western Sydney's industrial sector continues to demonstrate resilience and significant long-term growth potential, supported by strategic infrastructure developments and a diverse range of demand drivers.

“A critical factor in Western Sydney’s market dynamics is the limited availability of land, particularly in the inner and central western regions. These supply constraints have played a significant role in driving up land values and rental rates, making these areas some of the most competitive in the industrial market.”

While land scarcity presents challenges, it also creates opportunities for infill projects, particularly in key suburbs such as Lidcombe, Rosehill, and the North West sector, where substantial infrastructure investments are transforming the landscape.

Vines said the outer west and southwest precincts, including Kemps Creek, Marsden Park, and Badgerys Creek, are emerging as key growth areas with considerable potential for new supply.

The report found that the availability of developable land in these regions is fostering significant industrial development, which is expected to continue over the coming years. These areas are poised to add 2-3 million sqm of new industrial space over the next five years, catering to the growing demand for logistics and distribution facilities.

Vines said, Western Sydney's strategic importance, ongoing infrastructure improvements, and diverse demand drivers position it well for long-term growth.

“Investment trends in Western Sydney’s industrial sector are also undergoing notable changes. The report highlights a softening of investment yields from historic lows, with current yield ranges widening to 4.25% - 6.50% across different submarkets.

“This yield expansion reflects the market’s adjustment to higher interest rates and broader economic conditions. While institutional activity has slowed, owner-occupiers and private investors remain highly active, particularly for smaller assets.”

The report found rental rates, which have seen substantial growth in recent years, are now showing signs of moderation. The report indicates that rental growth rates are stabilising, with recent increases more modest compared to the double-digit growth previously experienced. Despite this moderation, the demand for industrial space remains strong, particularly for large distribution facilities and last-mile logistics assets, driven by the ongoing need for efficient logistics networks.

“Infrastructure projects, including the development of the Western Sydney Aerotropolis, continue to shape the region’s industrial sector, attracting significant interest from investors and developers alike. Although the initial e-commerce boom has moderated, the strategic importance of Western Sydney as a logistics hub ensures that demand for industrial space remains robust.”

“Despite the challenges posed by economic pressures such as interest rate fluctuations and inflation, the long-term performance of Western Sydney’s industrial market remains strong. Over 5- and 10-year periods, the region has consistently achieved impressive growth across key metrics, including land values, rents, and total returns. This performance showcases the region’s resilience and its continued appeal as a prime destination for industrial investment in Sydney.”

Click here to access a copy of > Ray White Commercial (RWC) Western Sydney’s latest report