To start 2026, Australia’s industrial property and construction markets were in a very different place to where they were 18 months ago, with rising vacancies and softening construction costs leading to cautious optimism for occupiers. The conflict in the Middle East looms to potentially disrupt this period of relative stability, but experts from TMX Transform say the current environment is time to think strategically to achieve long term stability.
For occupiers who have spent the past few years reacting to cost spikes, supply shocks, and a market that moved week to week, experts from TMX Transform say the current environment offers time to think strategically.
State by state: where the opportunity sits
According to TMX Transform’s recently released report, Across the Network, Victoria remains the most active leasing market. Rents sit well below Sydney levels even after outgoings.
Stefanie Frawley, Executive Director of Property at TMX Transform, says they are still seeing a lot of interest from occupiers unaffected by foreign investment surcharges. “Occupiers are also asking whether they can service Sydney out of Melbourne entirely, because Sydney is just becoming unaffordable for some businesses,” she says.
Brisbane continues to attract occupier interest, with the report pointing to population growth, infrastructure investment, and strong multimodal connectivity ahead of the 2032 Olympics as the key drivers. Sydney’s outlook appears different – Stefanie says South Sydney rents have reached the point where they now rival commercial office rates in some markets, pushing occupiers westward. The report notes that Sydney’s topography and development constraints are pushing occupiers further west – and the further west development goes, the harder it becomes to secure reliable port access and transport infrastructure.
The cost story: what has changed
Not too long ago, if an occupier hadn’t signed a heads of agreement within a week, landlords were repricing the site upwards. Construction costs were shifting week on week, and there was little time to interrogate whether a property decision served a broader network strategy. The cost of that era is still sitting on occupiers’ books, with many businesses locked into leases at peak rents they are still paying today.
“Rents have increased dramatically over the past five years,” says Stefanie. “Property is just one component of the supply chain, but it’s a significant one – so the cost must be scrutinised.”
Occupiers who engage early and with proper representation can generate significant savings, often more than the headline numbers suggest. Landlords will typically offer incentives such as rent-free periods or contributions toward fit-out costs as part of a lease negotiation, and the gap between what’s offered and what’s achievable can be substantial. “Without proper representation, a business might think it’s getting a great deal because there’s a 20 per cent incentive on the table,” Stefanie says.
“But they could be getting 25 or 30 per cent, plus another three or four per cent to fund fit-out works and upgrades or through negotiating improved terms within their leases. There is a lot more to a negotiation than just the rent.”
What are occupiers doing with ESG?
Across the Network indicates that Green Star ratings have moved firmly into the optional category for most occupiers. In the past 12 months, Stefanie says ESG has rarely featured as a critical concern in occupier conversations. “Occupiers are not prepared to fund upgrades that deliver no operational payback. If it’s built into the building, great – but there’s no appetite to pay an extra two dollars per square metre to implement initiatives that don’t come back to the business.”
What remains front of mind is staff amenity: natural light, end-of-trip facilities, and quality working environments. These have become baseline expectations rather than headline features. Targeted sustainability investment with a clear commercial case, solar being the most common example, is still being pursued, but Stefanie says fewer occupiers are raising ESG as a key priority.
Construction: stable, but not simple
Angus Perry, Executive Director of Project Services at TMX Transform, describes the current construction environment as the most predictable in years. Whilst recent events in the Middle East have caused sudden cost shocks into some parts of the construction supply chain, most notably in oil-based products such as PVC piping and in commodities reliant on diesel such as concrete, the overall construction industry is seeing levels of predictability that provide an environment for strategic decision-making. Steel costs have dropped, materials availability has improved, and business cases can now be built on numbers that hold through a three-to-six-month procurement process – something that was near impossible when costs were escalating week on week.
“Cost escalation is now far more moderate, which allows occupiers to develop business cases with confidence,” says Angus. “After months of testing, design, and approvals, they can land on a number they trust. That certainty is what enables long-term investment decisions to proceed.”
Risks worth pricing in early
Angus points to fire approvals as an area where occupiers are often underprepared when it comes to construction. As automation has become more widespread, fire and authority approvals for automated facilities have become a material execution risk because fire authorities now require access inside racking systems. This is a change that adds months to programmes and, in some cases, millions in unplanned fire system upgrades.
“Clients expect to sign the lease, invest in automation, and go live on a set date – then they find out they can’t go live for another two to four months because of the approval process,” Angus says. “Getting occupiers engaged years out from lease expiry, especially if they’re automating, is essential to project success.”
He notes that New South Wales planning timelines remain the longest nationally, typically around 12 months, and that Victoria’s approval certainty has softened in some locations, with permits that once took six to 12 weeks now stretching to three months or more.
The Across the Network report indicates that as a result, sites with existing or advanced approvals are increasingly commanding a premium, particularly for occupiers running national rollouts where there is little flexibility on timing.
Data centres: a variable to watch
Both Angus and Stefanie mention that data centres are likely to reshape the industrial property landscape over the next few years. Major developers are already reallocating capital toward data centres, which compete for the same land, labour, and power infrastructure as industrial development.
“We’re going to see skills diverting into this new asset class,” says Angus. “Combined with the prospect of institutional industrial landowners reallocating their existing land parcels to data centres, these factors lead to potential upward pressure on development costs for future greenfield sites.”
Foresight separates the leaders
The occupiers getting the most from current conditions are those planning at least three years ahead of lease expiry, and in many cases, a decade or more. A procurement and construction programme alone can take three years. Add a lease term of 10 to 15 years and organisations are effectively making decisions with a 13-to-20-year horizon.
Three years may sound like plenty of lead time to some, but Stefanie says a long-term property plan needs a lengthy runway, especially somewhere like Sydney where planning constraints, land topography, and DA timelines make late starts costly. She says occupiers without proper representation are also leaving significant value on the table by underestimating incentive levels, missing off-market opportunities, and failing to extract the full range of landlord contributions the current market supports.
“It’s never too early to start those conversations,” Stefanie emphasises. “Even three years often isn’t enough time. That’s what you need if you’re already ready to go.”
Download Across the Network here.
This article was originally published in MHD Supply Chain on 14 April 2026.