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Australian industrial property continues to lead commercial real estate performance, but artificial intelligence is poised to fundamentally transform which assets remain competitive, according to Ray White. Industrial property delivered total returns of 8.6 per cent in December 2025, with capital growth of 4.1 per cent, the strongest of any major asset class.
"Industrial was Australia's most-traded asset class in 2025, with $29.58 billion changing hands across the year, up 44.9 per cent from 2024, accounting for 36.8 per cent of all national commercial property activity," Ray White said.
Average transaction sizes have grown to $6.01 million as buyers recognise existing stock carries genuine scarcity value, with Brisbane nearly doubling its volumes to $7.84 billion while Sydney remained the dominant market.
"The depth and consistency of this activity, drawing institutional capital from Canada, Singapore and the United States alongside domestic super funds and REITs, reflects a market that global investors continue to regard as fundamentally undersupplied," Ray White said.
AI driving operational transformation
Ray White said artificial intelligence is rapidly moving from a back-office tool to the engine room of modern warehouse and logistics operations. "Automated storage and retrieval systems, autonomous mobile robots and AI-powered inventory management are becoming standard fitout in the most sought-after facilities globally," Ray White said.
The warehouse automation market in the United States is projected to more than double from US$25 billion in 2024 to over US$54 billion by 2029, with Amazon targeting 30 to 40 per cent automated order fulfilment by 2030. "Australia is well positioned to benefit from these trends. The country's persistent labour cost challenges and the concentration of e-commerce and logistics activity along major metropolitan fringe corridors create the same economic incentives for automation," Ray White said. The transport, postal and warehousing sector recorded 5.1 per cent business growth in the year to June 2025, among the fastest growing industries in the country.
Supply constraints intensify pressure
The NSW Government's Employment Lands Development Monitor reveals the severity of supply constraints in Sydney. "Of the 20,210 hectares of zoned employment land across Greater Sydney, just 631 hectares of undeveloped land has access to water and sewer connections, representing less than nine per cent of all undeveloped stock," Ray White said.
Almost all of this sits in Western Sydney, concentrated around the Aerotropolis precinct. "For the vast majority of established Sydney industrial markets, developable land is effectively exhausted. As the logistics industry moves toward AI-driven automation that demands larger, more technically specified facilities, the land capable of accommodating those buildings is further from the city than ever," Ray White said.
New specifications creating market divide
AI-enabled automation systems require substantially greater power capacity than conventional warehousing, along with high-bandwidth data infrastructure, enhanced temperature control and redundant power supply. "Assets that could meet these requirements will likely command premium rents and attract the strongest tenants. Those that cannot face growing obsolescence pressure," Ray White said.
Ray White said the relationship between AI and overall demand for industrial space is complex, with smarter supply chains driving e-commerce growth while efficient inventory management could reduce total footprint requirements. "The net effect on aggregate demand is uncertain, but we're seeing movement toward well-specified, technology-capable assets in locations with strong logistics connectivity, and away from ageing secondary stock," Ray White said.
"For investors, the near-term picture for industrial property remains among the most attractive in the commercial sector, but the medium-term opportunity lies in understanding which assets are positioned to meet tomorrow's occupier requirements."
