Australian industrial property remains the standout performer in commercial real estate, but Ray White’s Vanessa Rader said artificial intelligence is about to redefine what prime logistics space really means.
The latest MSCI figures show industrial assets delivered total returns of 8.6% in the year to December, underpinned by capital growth of 4.1% – the strongest price gains of any major property sector. Against national commercial property capital growth of just 2%, the sector continues to outpace the broader market.
Recent Ray White analysis shows capital values recovering after two years of adjustment, even as investors brace for another possible RBA rate hike.
Industrial was Australia’s most actively traded commercial asset class in 2025, with $29.58 billion in transactions, up 44.9% year-on-year and representing 36.8% of all national commercial deals. Average deal size climbed to $6.01 million as buyers placed a higher premium on existing stock in a chronically tight market.
Queensland led momentum, with Brisbane volumes almost doubling to $7.84 billion, while Sydney remained the country’s largest industrial hub. Institutional capital from Canada, Singapore, and the US, alongside local super funds and REITs, is helping sustain deep liquidity as investors continue to view the market as fundamentally undersupplied.
Beneath the strong headline numbers, artificial intelligence is emerging as a structural force set to reshape demand, design and valuation.
Globally, “automated storage and retrieval systems, autonomous mobile robots and AI-powered inventory management are becoming standard fitout in the most sought-after facilities,” Rader said.
In the US, the warehouse automation market is projected to jump from US$25 billion in 2024 to more than US$54 billion by 2029, with Amazon targeting 30% to 40% automated order fulfilment by 2030.
Australia faces similar cost and labour pressures, particularly along major e‑commerce and logistics corridors. The transport, postal, and warehousing sector recorded 5.1% business growth in the year to June 2025, adding to demand in markets already dealing with record-low vacancies.
The NSW Government’s Employment Lands Development Monitor underscores the supply squeeze in Sydney. Of 20,210 hectares of zoned employment land in Greater Sydney, just 631 hectares of undeveloped land has water and sewer access, less than 9% of all undeveloped stock, mostly in Western Sydney around the Aerotropolis.
As logistics operators push toward AI-enabled automation, demand is intensifying for large, power-hungry, technology-rich warehouses.
“AI-enabled automation systems require substantially greater power capacity than conventional warehousing, along with high-bandwidth data infrastructure, enhanced temperature control for robotic systems, and redundant power supply,” Rader said.
Assets that meet these specs are expected to secure premium rents and blue-chip tenants, while ageing secondary stock faces mounting obsolescence risk.
The net impact of AI on total industrial space demand remains unclear, with denser, automated storage potentially reducing some occupiers’ footprint even as e‑commerce and population growth continue to drive additional logistics needs.
For investors, the near-term outlook for Australian industrial remains compelling, but the next phase of outperformance is likely to hinge on backing AI-ready, well-connected assets – and avoiding properties that cannot keep up as the gap between prime and secondary widens.
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