Why Melbourne’s Industrial Market is One to Watch in 2025

As vacancy rates tighten and land supply dwindles, Melbourne’s industrial sector is standing out as one of Australia’s most resilient and opportunity-rich markets in 2025.

Vacancy is at record lows

Industrial vacancy rates across Melbourne have reached their lowest point in years. Tenants in sectors like eCommerce, food distribution, and transport are actively chasing space — but there’s not much available. Landlords are in a strong position, and the imbalance between supply and demand is showing no signs of slowing.

• Vacancy across Melbourne’s west, north and southeast sits below 1%

• Leasing activity remains strong across small, mid, and large-format warehousing

• National and global occupiers are competing for limited stock

• Industrial land supply unable to keep up with growing demand

• Rental rates increasing across all major precincts

The western corridor continues to dominate

Melbourne’s western suburbs remain the powerhouse of industrial activity, offering scale, connectivity, and access to labour. The area has become the first port of call for freight, warehousing and logistics, and the volume of tenant interest continues to climb.

• Key suburbs: Truganina, Derrimut, Laverton North, Tarneit

• Major arterials: Princes Freeway, Western Freeway, and Western Ring Road

• Ideal for freight, eCommerce, and food-grade warehousing

• Strong developer activity but ongoing land constraints

• Institutional investors showing sustained interest in the west

Infrastructure and freight access set it apart

A key strength of Melbourne’s industrial market is access — to ports, roads, rail, and customers. Major infrastructure projects are now coming online, giving tenants faster movement of goods and giving investors confidence in long-term demand.

• Proximity to Port of Melbourne — Australia’s busiest container port

• Road, rail and intermodal connectivity across western and northern corridors

• West Gate Tunnel Project unlocking future travel and freight efficiency

• Growth supported by state government freight and logistics strategy

• 24/7 operational capacity in key zones driving logistics demand

Rental growth is supporting investment

Rents are climbing across most industrial precincts, and it’s no surprise. With limited availability, quality tenants are securing leases early — and paying more for the privilege. For investors, that’s leading to improved cashflow and secure, longer-term returns.

• Net face rents increasing by 15–25% year-on-year

• Rental incentives tightening due to low supply

• Longer lease terms being signed by anchor tenants

• Prime-grade warehouse rents in the west and north leading the market

• Yields remain competitive despite rising interest rates

Northern and southeastern corridors gaining momentum

While Melbourne’s west often leads the headlines, the north and southeast are gaining serious traction. These areas are becoming hotspots for manufacturers, trade services, and regional distributors — especially as land becomes harder to source further west.

• Northern suburbs: Campbellfield, Somerton, Epping — driven by large-scale manufacturing and national distribution

• Southeast suburbs: Dandenong South, Keysborough, Braeside — strong demand for warehousing and industrial services

• Access to skilled workforce and established industrial infrastructure

• Opportunities for strata industrial and small-lot development

• Strong pre-lease activity for upcoming warehouse builds

Land supply is under pressure

One of Melbourne’s biggest long-term challenges is land supply. As industrial land is absorbed or rezoned for residential use, availability continues to tighten — especially close to the city. This scarcity is increasing values and pushing developers further out.

• Key industrial precincts nearing capacity

• New land releases often face long lead times and planning delays

• Urban sprawl and residential growth pushing against industrial zones

• Developers shifting focus to land banking and strategic acquisition

• Future projects may face higher entry costs and tighter yields

What tenants are looking for in 2025

Tenant expectations have evolved. It’s not just about warehouse size anymore — it’s about efficiency, flexibility, and compliance. Businesses are prioritising operational layout, automation capacity, and sustainability when choosing a location.

• Larger internal clearance and high-volume racking capacity

• Drive-through and multiple roller-door access

• Energy efficiency and solar-ready facilities

• Access to major arterials and key freight corridors

• Proximity to labour and residential catchments

Investor confidence remains strong

Even with higher interest rates and tighter lending conditions, the appetite for quality industrial property in Melbourne remains high. Investors are attracted to the sector’s consistent returns and low vacancy risk, particularly in prime locations.

• Strong performance history and resilient leasing conditions

• Lower vacancy risk compared to office or retail

• Institutional-grade assets still trading off-market

• Strong tenant covenants and long WALEs in key assets

• Steady capital growth outlook through 2025 and beyond

In summary

Melbourne’s industrial market is outperforming most commercial sectors in 2025. With demand outpacing supply, infrastructure driving growth, and rents on the rise, now is the time for investors and developers to take a closer look.

• Industrial vacancy below 1% across metro Melbourne

• Western corridor remains a freight and logistics hub

• Infrastructure upgrades driving long-term growth

• Rental rates and yields staying strong

• Land scarcity is underpinning future value

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