Sydney’s industrial land shortage is driving land appreciation and underpinning positive long-term rent growth, with just 4.0% (564ha) of the city’s serviced and industrial zoned land undeveloped, a new CBRE report shows.

CBRE’s Sydney Industrial & Logistics Land Supply report identified a critical shortage of available land in Western Sydney, with only 190ha of land available for development in the next 12 months, well below current NSW government estimates.

CBRE’s Head of Industrial & Logistics, Data Centre Research Australia and Director of NSW Research Sass Jalili said, “Our assessment of western Sydney land supply shows that there is even less developable land available than has been previously reported in the public domain. The ELDM identifies 333ha as zoned undeveloped and serviced, however our in-depth analysis only identifies 190ha. Therefore, there is a significant mismatch between headline data versus ‘underlying’ data.”

The report forecasts Sydney will face a land supply deficit in the range of 91ha to 319ha between 2025 and 2030, with demand from transport & logistics, e-commerce, and manufacturing occupiers far outstripping supply.

The lack of available land has driven significant appreciation in land values, with 49% growth across Sydney over the past four years to Q4 2024. Sydney also saw 7.0% year-on-year growth in 2024 for super prime grade industrial assets.

Ms Jalili noted Sydney has one of the tightest vacancy rates globally at 2.1% which is expected to remain at sub-4.0% over the next year, given the high level of pre-committed development supply.  

“The supply response has been insufficient to meet demands in the Sydney market and this has led to strong rent growth since 2021,” she said.

“E-commerce growth will continue to drive industrial and logistics floorspace demand. Western Sydney Airport, set to open in 2026, will act as a powerful magnet for industrial and logistics occupiers, unlocking new opportunities in outer western Sydney. As demand increases, this will likely result in higher land absorption rates, particularly in key precincts surrounding the airport,” Ms Jalili added. 

The report found the retail trade sector dominated new floorspace take-up, accounting for 42% of all pre-lease transactions. This was followed by the transport, postal and warehousing sector, particularly road transport occupiers.

CBRE’s National Director Industrial & Logistics, Cameron Grier said, “Sydney has a chronic shortage of industrial land available for development over the next decade. At the same time, we are witnessing occupier footprints increasing rapidly and with Sydney’s challenging topography compared to Melbourne, this shortage of land is further exacerbated when accommodating requirements north of 40,000m2.”

Lease transactions across all three key sectors were concentrated in Sydney’s outer north west precinct, which accounted for nearly 50% of floorspace leased over the past decade. The south west precinct was the next most in demand precinct at 20%.