TL;DR: The Quick Summary for Busy Managers
Australian warehouse rents reset higher between 2021 and 2024, and that new level has stuck. Colliers reported Sydney average net face rents up 75% over the three years to the first quarter of 2024. JLL reported South Sydney prime face rents had doubled over a similar window, to $419 per square metre. Growth has since slowed to flat or mid-single digits, and landlords are giving more incentive, but a new lease is still written off a much higher base. National industrial vacancy was 3.2% in the first half of 2026 (CBRE), still under the 4% level they treat as a balanced market. On a 10,000 square metre building, recovering or deferring 10% of the floor is worth roughly $120,000 to $350,000 a year in rent, depending on the city. That 10% is a planning figure for sites losing space to fixed locations, half-empty bays, and safety stock held because nobody trusts the record. It is not a guaranteed eveXso result.
The rent reset already happened
The number operators feel on renewal is not a 2026 spike. It is the 2021 to 2024 reset, still sitting in the lease.
Through the pandemic, vacancy in the big east-coast markets fell to levels that were, in places, close to zero. CBRE's 2023 Sydney land-supply work put vacancy at 0.2% and found only 4% of industrial-zoned land in the metropolitan region was both undeveloped and serviced. Transport, logistics, and e-commerce took most of the new space, and a lot of that demand was expansion, not a tenant moving from an old shed to a new one. Rents followed. CBRE put Sydney super-prime rental growth at a 14% compound annual rate from the first quarter of 2021 to the first quarter of 2023.
By early 2024 the three-year bill was visible. Colliers put the rise in Sydney average net face rents at 75% over that period. In South Sydney, JLL said prime face rents had doubled in three years, with newly completed buildings resetting the precinct at $419 per square metre. After a 10% incentive, effective rent was $372. At that point South Sydney warehouse effective rent sat above secondary fringe-office effective rent.
That is the figure that matters on a renewal. A tenant whose last lease was struck in 2019 or 2020 is not arguing about this year's 2%. They are arguing about a base that moved 50% to 100% while they were busy picking orders.
2026: slower growth, same bill
Face rents have cooled. They have not reversed.
Knight Frank's Sydney industrial update for the second quarter of 2026 shows prime net face rents unchanged on the quarter. Western Sydney prime sits in a $200 to $300 per square metre band. The South, the infill belt through places such as Banksmeadow and Matraville, sits at $350 to $475. Incentives on Inner West stock average about 20%, and on the South about 17.5%, so the rent you actually pay is lower than the face rate. It is still a long way from pre-2021.
Melbourne is cheaper and looser. Knight Frank's second-quarter 2026 precinct report puts the city-wide prime net face average at $155 per square metre, up 5.6% on the year, with net effective rent at $123 after incentives of about 21%. Vacancy there is 5.0%, above Melbourne's own 10-year average. Brisbane, Perth, and Adelaide sit below the Sydney and Melbourne prime averages, and they have been growing off a lower base.
Nationally, CBRE's first-half 2026 vacancy report has Australia at 3.2%, unchanged on the half, and one of the lower industrial vacancy rates they track globally. They expect a peak around 3.5% in the second half of 2026, still under 4%, then a drift back down from 2027 as the development pipeline slows. New supply is still being built. Developers are also facing tighter pre-commitments, higher build costs, and harder finance, which is why that pipeline is unlikely to hand tenants a real rent cut.
Two practical consequences follow. Renewals and new leases are priced off the new base: an incentive of 20% on a $250 face rent is a $200 effective rent, not a return to $130. And the next building is the expensive option. In Sydney, serviced vacant land was already scarce in 2023, and the precincts with the most new stock are the ones where rents have stopped rising, not fallen. Moving to a larger shed to solve a space problem means taking today's rent, plus the move, the fit-out, and a period of running two buildings.
What a square metre costs
These are net face rents. Outgoings and GST sit on top. Incentives reduce the effective rent. They do not remove the face-rent anchor when the lease is reviewed.
| Market | Prime net face, mid-2026 | Annual rent, 10,000 sqm | 10% of that floor |
|---|---|---|---|
| Sydney West | $200 to $300 / sqm | $2.0m to $3.0m | $200,000 to $300,000 |
| Sydney South | $350 to $475 / sqm | $3.5m to $4.75m | $350,000 to $475,000 |
| Melbourne average | $155 / sqm face, $123 effective | $1.55m face, $1.23m effective | $155,000 face, $123,000 effective |
Sources: Knight Frank Sydney and Melbourne industrial precinct reports, second quarter 2026. Ranges are prime net face. The Melbourne effective column uses Knight Frank's reported 21.2% average incentive.
A 10% figure is a planning number. It is about the size of gap that shows up when a building is "full" in the manager's head and half-empty once you measure locations. Some sites are already tight and will not find 10%. Some will find more, because the stock is in the building and the system cannot see it.
Where the space actually goes
Most warehouses do not run out of building. They run out of locations they trust.
Fixed locations for stock that is not there. A pick face or a bulk bay reserved for a SKU stays empty for weeks because that is where it lives. The next receipt of something else goes to overflow, or to the floor, because the reserved bay is left alone.
Honeycombing. A location that holds one pallet is treated as full when it can hold three. Partial pallets multiply after picks, break-bulk, and returns. Without a rule for consolidation, each remnant occupies a whole position.
Safety stock held because the record is wrong. If the system says 40 and the bin has 12, the planner orders more. The extra stock arrives and needs a location, often in the same aisle as the stock nobody could find. Inventory you do not trust is inventory you buy twice. The second purchase is a space problem as well as a cash problem. The labour side of that gap is covered in why inventory accuracy is the metric that moves the P&L.
Slow movers in prime positions. Fast lines sit in bulk while the golden zone holds cartons that move once a month. Travel time gets the attention. The space cost is the bulk location you could have freed, and the pick face sized for a month when it only needs a few days.
Stock with nowhere to go. Expired, quarantined, damaged, and "we will deal with it" pallets occupy the same racking as saleable goods. Without a status and a process, they stay until the next stocktake.
Receipts with no putaway rules. Product lands in the first empty bay that will take it. Fast and slow, heavy and light, dated food and hardware, all share a logic called "it fit". A few months later the building looks full and the pick path looks random.
None of this requires a badly run warehouse. It requires a warehouse whose system records a quantity and not a location, or records a location and not a capacity.
What changes when the WMS runs the locations
The space gain comes from five controls. They are ordinary warehouse practice. They stick when the system directs them and the floor cannot quietly opt out.
- Every unit has a location, and the location has a capacity. Putaway is directed to a bay that can take the pallet: weight, height, and how many positions are free. A bay with one pallet in a three-pallet position is not full. The driver is sent there before a new bay is opened.
- Fixed where it earns its keep, floating everywhere else. Pick faces stay stable for the lines people touch all day, and they are sized to a few days of demand. Everything else floats. A SKU with no stock releases its location. A SKU that arrives takes the best free position.
- Slotting follows movement. Fast lines sit at the pick face. Slow lines sit in reserve, up high, or in a zone you only visit on a replenishment. When the velocity changes, the slot changes.
- Status gets stock out of saleable racking. Quarantine, hold, damaged, and expired product has a home that is not a prime bay. Dates are visible, so stock is shipped or written off before it becomes a pallet nobody will touch.
- The record is trusted, so the buffer shrinks. When location accuracy is high enough that planners believe it, safety stock comes down. Less stock is the most reliable space saving there is. It also releases cash. A scan on despatch, with putaway left to memory, will not get you there. Confirming every move, from receipt to bay to pick face to despatch, will.
Shorter travel is real, and it is mostly a labour saving. The rent saving is the locations you stop opening and the stock you stop rebuying.
"The square metre you can still influence is the one inside the four walls."
A straight business case
Take a 10,000 square metre operation in Western Sydney on a prime face rent of $250 per square metre. Net face rent is $2.5 million a year before outgoings. Call effective rent $200 after a 20% incentive: $2 million. That 20% is an illustration in the range Knight Frank reports for inner and southern Sydney in mid-2026, not a published Outer West average.
Measure three things you can count without a consultant:
- Empty reserved locations, as a share of all locations.
- Locations occupied below half their stated capacity.
- The cube of stock that exists because a stockout was caused by a record, not by a supplier.
If those three add up to a tenth of the building, the avoided rent is about $200,000 a year on the effective rate, $250,000 on face. In Melbourne, the same tenth is about $123,000 effective. In South Sydney, at the bottom of the current prime range, it is $350,000 before you argue about incentives.
That is the comparison that belongs next to a WMS proposal. Software and scanners are a known cost. The alternative is the next lease, priced off today's face rent, plus a relocation. Deferring that lease by two or three years often pays for the system on rent alone, before labour, errors, and inventory are counted.
The same arithmetic tells you when space is the wrong headline. A site that already runs floating locations, consolidates partials, and holds little untrusted buffer will not find a tenth of the floor. That site still wants a WMS for pick accuracy, traceability, and labour. It should not be sold a rent holiday it will not see.
What to do before you sign the next lease
- Count locations, not floor area. A building at 95% of locations used can still be at 60% of cube if every bay holds one pallet.
- Separate reserved empty space from genuinely full space. Reserved empty is a process choice.
- Price the expansion at today's effective rent in your precinct, including outgoings, for the term you would actually sign.
- Put the location discipline in first if the audit shows reserved empties, honeycombing, or buffer stock. Re-measure after a full cycle. Then decide whether you still need the shed.
The market will keep charging 2024 rents for a while. CBRE's own view is that vacancy stays under 4% and starts tightening again after 2026.
Run the numbers on your own floor
The rent table above is the occupancy cost. Labour, errors, and inventory sit on top of it. The ROI calculator is a starting point for those other lines. If you want the space audit walked through against your own lease, book a discovery call.
Sources
- Colliers, Australian Industrial and Logistics Snapshot, Q1 2024. Sydney average net face rents up 75% over three years.
- JLL, reported by The Industrialist, 23 July 2024. South Sydney prime face rent $419 per square metre, doubled in three years. Effective rent $372 at a 10% incentive.
- CBRE, Sydney Industrial and Logistics Land Supply, 2023. Vacancy 0.2%. Four percent of metropolitan industrial-zoned land undeveloped and serviced. Super-prime rent growth 14% a year from Q1 2021 to Q1 2023.
- Knight Frank, Sydney Industrial Precinct Report, Q4 2024. Prime net face average $267 per square metre, up 3.9% year on year.
- Knight Frank, Sydney Industrial State of the Market, Q2 2026. Prime face rents flat on the quarter. West $200 to $300. South $350 to $475.
- Knight Frank, Melbourne Industrial State of the Market, Q2 2026. Prime net face average $155 per square metre, up 5.6% year on year. Net effective $123. Incentives 21.2%. Vacancy 5.0%.
- CBRE, Australia Industrial and Logistics Vacancy Report, first half 2026. National vacancy 3.2%. Expected peak 3.5% in the second half of 2026, then lower from 2027.
