Melbourne remains one of the most competitively priced industrial markets among Australia's major cities, prompting some occupiers to relocate or consolidate operations in the city and downsize in higher-cost markets, new CBRE research shows.

The Melbourne Industrial & Logistics Land Supply Report includes an analysis of undeveloped industrial land availability and development pipeline.

It highlights land constraints, diverging precinct dynamics, and an emerging imbalance between demand and developable land which is expected to tighten market conditions and support long-term rental growth.

CBRE's Head of Industrial & Logistics, Data Centre Research Australia and Director of NSW Research Sass Jalili (pictured) noted that while rents have risen significantly over recent years, growth in Sydney and Brisbane has been even more pronounced, widening the rental differential in Melbourne's favour.

“With further rent escalation forecast in Sydney and Brisbane over the next two years, Melbourne's cost advantage is expected to sustain elevated occupier demand – supporting a step change in industrial land absorption in the medium to long term,” Ms Jalili said.

The report includes a comprehensive parcel-by-parcel assessment to identify how much land can accommodate future development and when it becomes available.

The report found Melbourne's five year average land absorption rate is almost double what has been recorded for the Sydney market, pointing to a shortfall within five years.

“Shrinking infill opportunities are reshaping occupier and investor behaviour. Occupiers are increasingly evaluating multi-location strategies, balancing inner-precinct proximity to customers with outer-precinct consolidation centres to manage cost pressures and secure longer-term flexibility.

"As rental differentials between inner and outer precincts widen, occupiers may also look to forward-leasing Melbourne's West and North while rental growth remains subdued and incentives are elevated over the next 12 months,” Ms Jalili added,

The report notes three key sectors are driving demand for industrial and logistics space in Melbourne over the past five years:

• Transport, postal and warehousing
• Retail and e-commerce
• Manufacturing

Together, these sectors underpin 80% of Melbourne's industrial leasing activity since 2020, illustrating the ongoing need for strategically located, serviced industrial land particularly in the West and South East.