Is the Industrial Property Boom Over? Why Investors Are Still Backing Warehouses and Logistics Assets

Few commercial property sectors have attracted as much attention over the past five years as industrial property.

Warehouses.

Logistics facilities.

Distribution centres.

Industrial showrooms.

The asset class has consistently outperformed many other commercial sectors, attracting everyone from institutional funds to private investors seeking reliable income and long-term growth.

But after years of strong performance, a common question continues to emerge:

Has the industrial property boom already happened, or is there still room to grow?

In this episode of the Commercial Property Investing Podcast, Arjun Paliwal and Chris Huxter explored the forces driving industrial property demand, why institutional investors shifted billions into the sector, and what opportunities still exist for investors today.

The discussion revealed that while yields have compressed in some markets, the long-term drivers supporting industrial property remain firmly in place.

What Happened

The episode focused on the evolution of Australia's industrial property market and the factors that have fuelled its rise.

Chris shared insights from his experience managing institutional-grade assets, explaining how investor behaviour changed during COVID and why industrial property became one of the most sought-after sectors in commercial real estate.

The conversation explored:

• E-commerce growth.

• Logistics demand.

• Vacancy rates.

• Industrial yields.

• Tenant selection.

• Market opportunities.

• Common investor mistakes.

A major theme throughout the discussion was that industrial property isn't simply benefiting from a short-term trend. Instead, it sits at the centre of several long-term economic shifts that continue supporting demand.

Key Findings

1. COVID accelerated a major shift toward industrial property

According to Chris, industrial cap rates were commonly sitting between 6% and 7% in the early 2020s before the pandemic dramatically changed investor behaviour.

As office occupancy declined and retail assets became more uncertain, institutional investors began searching for sectors that offered greater resilience.

Industrial property quickly emerged as one of the safest options.

Unlike offices, warehouses still needed people.

Unlike retail centres, goods still needed to be stored, packed, transported, and delivered.

As a result, significant capital flowed into industrial assets, helping drive strong demand and price growth across the sector.

2. E-commerce permanently changed logistics requirements

One of the strongest drivers discussed throughout the episode was the rise of e-commerce.

Consumer expectations have changed dramatically.

Fast delivery is no longer viewed as a luxury.

It's increasingly expected.

Businesses now need inventory closer to customers, creating stronger demand for industrial facilities located near major population centres and transport infrastructure.

The discussion highlighted how modern businesses have become increasingly reliant on logistics efficiency, making industrial property more valuable than ever before.

3. Retail businesses are shrinking storefronts and expanding warehouses

The episode explored a trend that many investors overlook.

Rather than expanding retail footprints, many businesses are doing the opposite.

Retail stores are becoming smaller and more efficient while inventory storage shifts into industrial facilities.

This allows businesses to:

• Reduce expensive retail rent.

• Improve operational efficiency.

• Hold more stock.

• Service online orders more effectively.

• Maintain customer convenience.

The result is greater demand for industrial space and reduced reliance on large-format retail premises.

4. Industrial property values are driven by proximity

When discussing asset selection, Chris explained that industrial property value is often underpinned by three critical factors:

• Proximity to CBDs.

• Access to ports.

• Connectivity to major arterial roads.

These factors directly influence logistics efficiency and transportation costs.

The episode referenced a Mercedes-Benz industrial asset acquired approximately eight kilometres from Brisbane CBD, highlighting how major occupiers prioritise access to transport networks and customer bases when selecting industrial locations.

5. Yields have compressed, but opportunities still exist

Many investors worry that industrial yields have fallen too far.

Chris acknowledged that yields have compressed from previous highs, but argued that opportunities remain attractive in the right markets.

A key insight from the episode was the distinction between interest rates and yields.

As Chris explained:

Interest rates are a moment-in-time metric.

Yields are an ongoing metric.

While interest rates fluctuate, rental income can continue growing over time, particularly in markets where demand remains strong and vacancy rates remain low.

6. Perth and Adelaide are among the strongest industrial markets

The discussion highlighted several locations currently attracting attention.

Perth and Adelaide were identified as particularly strong industrial markets due to extremely tight vacancy rates and strong leasing demand.

The panel also discussed opportunities within:

• Strategic parts of Melbourne.

• Newcastle.

• Select regional growth centres.

The common factor across these locations was limited industrial supply combined with growing economic activity and business demand.

7. Trade-related businesses offer strong tenant profiles

When discussing tenant selection, Chris highlighted several business categories that continue performing strongly.

Businesses supporting construction, infrastructure, and trade industries remain highly attractive.

Examples include:

• Plumbing suppliers.

• Electrical wholesalers.

• Construction-related businesses.

• Building material distributors.

• Industrial trade suppliers.

The discussion noted that these industries remain heavily reliant on physical products and services, making them less vulnerable to disruption from emerging technologies such as artificial intelligence.

8. Small industrial strata units can carry hidden risks

One of the most practical lessons from the episode focused on small industrial strata properties.

While these assets can appear attractive due to their lower entry price points, investors need to understand the risks involved.

Potential challenges include:

• Increased future supply.

• Shorter lease terms.

• Higher tenant turnover.

• Shared building maintenance obligations.

• Greater exposure to small business tenants.

The discussion highlighted that many small industrial tenants quickly outgrow their premises, creating more frequent vacancy and leasing costs for owners.

9. Larger industrial assets often provide greater choice and flexibility

According to Chris, investors operating above the $2.5 million to $3 million price point often gain access to a much wider range of opportunities.

This can improve:

• Tenant quality.

• Lease length.

• Asset scarcity.

• Location selection.

• Portfolio resilience.

While quality assets exist at all price points, larger industrial acquisitions often provide investors with more flexibility when targeting premium locations and stronger tenant profiles.

Action Steps

If you're considering industrial property investing, consider the following:

• Focus on locations with strong transport connectivity and logistics advantages.

• Review local vacancy rates before purchasing.

• Prioritise markets where businesses are competing for limited space.

• Assess tenant quality and industry resilience.

• Understand future supply pipelines that may impact rental growth.

• Be cautious when evaluating small industrial strata complexes.

• Consider the long-term impact of population growth and urban density.

• Focus on assets supported by enduring economic trends rather than short-term market sentiment.

Industrial property has benefited from powerful structural changes including e-commerce growth, logistics demand, population growth, and supply constraints.

While the market has evolved significantly over the past five years, the underlying drivers remain firmly in place.

For investors focused on quality locations, strong tenant demand, and long-term fundamentals, the industrial property story may still have plenty of chapters left to write.

If you'd like help identifying industrial property opportunities that align with your investment goals, book a discovery call with InvestorKit.