Is the supply shortage the same everywhere, or just Sydney?

The land-constraint story is strongest for Sydney's infill markets specifically, per Colliers and Knight Frank. Other cities and outer-ring locations have more room to build, which is part of why outer-ring transactions have overtaken infill nationally.

Will supply pick back up soon?

Knight Frank's own forecast has 2026 completions falling further than 2025, not recovering, and the underlying land constraint in infill Sydney is described as structural rather than a normal part of the building cycle, so no dated point at which it eases has been established.

Does falling supply mean I should sign a lease now rather than wait?

That's a business decision this page can't make for you, but a tightening pipeline alongside current vacancy data is a reasonable input into that timing, alongside your own growth plans and budget.

If I can't find bigger space, what are my options?

Getting more capacity out of your current site, through racking configuration, mezzanine, or reviewing whether your current building specification is actually being used to its limit, before assuming a move is the only path.

Why Developers Aren't Building More Warehouses

New industrial supply isn't just slowing down, it's genuinely shrinking, and the reasons are structural rather than a normal dip in the cycle. Land in the places operators actually want is running out, and the buildings that already exist are being held rather than turned over.

Last updated 2026-08-24

Completions are falling, two years running

Knight Frank's data has east coast industrial completions down 19% in 2025, with a further fall of roughly 20% forecast for 2026. A later update from the same house puts 2026 east coast completions at 1.64 million square metres, 21% below 2025 and around a million square metres below the 2023/2024 peak. That's a genuine two-year contraction in new supply, not a single soft quarter.

It's happening at the same time as JLL's Q2 2026 figures show 2.1 million square metres still under construction nationally, so the pipeline hasn't stopped, it's just narrower than it was, and narrower than current vacancy would suggest is comfortable.

The land constraint is real, not cyclical

Both Colliers and Knight Frank point to the same underlying problem in Sydney's infill markets specifically: there is no more land left to rezone for industrial use close to where operators actually want to be. Colliers describes southern Sydney infill as land-supply capped, with, in its own words, no ability to create more land. That's a structural ceiling on the precincts already carrying the most demand, not a temporary shortage that eases once interest rates or construction costs move.

This is also why outer-ring locations overtook infill markets for industrial investment transactions for the first time in the period Colliers covers, at 54% of national transactions. Capital is following the only land left to build on, further from the customers and labour catchments operators would otherwise choose.

What's actually driving the constraint

Three things are compounding. Land itself is scarce in the infill precincts where demand is highest, and what land exists is often held long-term by owners with no reason to sell into a tight market. Construction costs and financing conditions have made speculative development riskier than during the last building wave. And existing buildings, once a business is in one, tend to stay occupied, because moving is expensive and disruptive, so incumbents hold their space rather than testing the market.

This isn't expected to ease soon

Colliers' 2026 outlook has vacancy remaining near cyclical peaks through 2026 before tightening further over the following 12 to 18 months, which is another way of saying the market is expected to get harder to find suitable space in, not easier, over roughly the next two years. That timeline lines up with Knight Frank's completions forecast: a pipeline that's already fallen for two straight years isn't showing signs of a fast rebound.

For an operator weighing whether to lock in space now or wait for conditions to loosen, that's a genuinely useful data point. Waiting isn't obviously the safer bet based on what the research houses actually covering this market are forecasting, though the right call still depends on your own timeline and budget, not this page.

Demand hasn't slowed to match

A shrinking pipeline would matter less if demand were easing at the same rate, but the data doesn't show that. Knight Frank has industrial transaction volumes at $7.1 billion for the first half of 2026, up 23% on the year before and the strongest first half since 2022. CBRE separately reports national net absorption of more than 1.4 million square metres in the first half of 2026, more than double the second half of 2025.

Falling completions and rising absorption pulling in opposite directions is exactly the combination that keeps space tight even where individual quarters look steady on paper, an effect that compounds further at peak season when demand spikes hardest against a pipeline that's already shrinking.

What it means for an operator planning ahead

If you're assuming you can lease a bigger site nearby when you outgrow your current one, that assumption is weaker than it used to be, especially in Sydney's infill markets specifically. The practical response most operators land on is getting more out of the building they're already in: reviewing what the shed itself is actually capable of, and treating how much capacity the site really holds as a live question rather than something decided once at fit-out. Where a business genuinely can't fit inside its existing footprint, weighing outer-ring locations against the infill sites everyone else is competing for is now a live trade-off rather than a fallback.

It also raises the value of squeezing capacity out of racking rather than floor space. Wider expansion options inside an existing site, adding levels, tightening aisles, reconfiguring bays, are cheaper and faster than chasing scarce new supply, and a system that can genuinely be expanded within its existing frames is worth more to an operator in this market than one that can't.

Common questions

Is the supply shortage the same everywhere, or just Sydney?: The land-constraint story is strongest for Sydney's infill markets specifically, per Colliers and Knight Frank. Other cities and outer-ring locations have more room to build, which is part of why outer-ring transactions have overtaken infill nationally.
Will supply pick back up soon?: Knight Frank's own forecast has 2026 completions falling further than 2025, not recovering, and the underlying land constraint in infill Sydney is described as structural rather than a normal part of the building cycle, so no dated point at which it eases has been established.
Does falling supply mean I should sign a lease now rather than wait?: That's a business decision this page can't make for you, but a tightening pipeline alongside current vacancy data is a reasonable input into that timing, alongside your own growth plans and budget.
If I can't find bigger space, what are my options?: Getting more capacity out of your current site, through racking configuration, mezzanine, or reviewing whether your current building specification is actually being used to its limit, before assuming a move is the only path.

Sources

MHD Supply Chain — Industrial supply pipeline tightens across east coast, Knight Frank — Completions falling 19% in 2025 and forecast down further in 2026.
JLL — Industrial Real Estate Market Analysis, Q2 2026 — 2.1 million square metres under construction nationally as at Q2 2026.

Part of our guide to finding and leasing a warehouse.