Australian warehouse costs rise as Sydney rents shift

TMX Transform has published new benchmarking data showing warehouse construction costs rose across every facility category in Australia over the past quarter. The figures also point to shifting industrial rents in Sydney.

Its quarterly Across the Network report benchmarks ambient warehouse construction at AUD $1,150-$1,250 per square metre nationally, up from AUD $1,100-$1,200 in the previous quarter. Temperature-controlled facilities have risen to AUD $1,950-$2,350 per square metre, while freezer facilities are now benchmarked at AUD $2,750-$3,350 per square metre.

Concrete was identified as the main cost driver, with prices rising by AUD $8-$12 per cubic metre in April alone. The return of fuel excise is also likely to add further pressure to project costs.

Rental shifts

In Sydney, which the report described as the country's most expensive industrial market, prime grade net face rents now range from AUD $210-$500 per square metre. That compares with AUD $250-$400 in the previous quarter, leaving the lower end down by AUD $40 and the top end up by AUD $100.

The data points to a market where pricing is moving unevenly across asset quality and location, even as broader cost pressures continue to build through the development pipeline. TMX Transform said some occupiers had paused property decisions, contributing to slower transactional activity.

That caution is not being driven by fuel prices alone. Consumer price inflation at 4.6%, along with interest rates, employment costs and land taxes, is also weighing on decision-making.

Stefanie Frawley, Executive Director of Property, TMX Transform, commented on the implications for occupiers seeking new space. "Construction cost increases driven by fuel and materials are being built into the cost of development, and once embedded, those costs do not go backwards. For occupiers looking for quality product, the message is to act now," Frawley said.

Freight pressure

The report also set out the spread in domestic freight costs. Moving a full B-double load within the same state costs AUD $535-$630, while moving the same load to a distant state can cost AUD $3,100-$7,700.

Those interstate figures include routes such as rail freight to Perth and road or sea movements between Brisbane and Adelaide or Hobart. None of the rates include fuel surcharges, which are charged separately.

TMX Transform said margin compression in domestic transport was being passed through to supply chain operators and incorporated into pricing. In ocean freight, service risk was also rising alongside cost as carriers withdrew capacity and gave preference to higher-margin customers.

Broader market

Australian businesses are responding to current supply chain disruption more calmly than they did during the pandemic, continuing to make long-term network and property decisions despite the tougher cost environment, according to the report.

Justin Fried, Managing Director APAC, TMX Transform, said businesses making long-range decisions should stay focused on that horizon. "A network decision is a five-to-ten-year strategic capital commitment. The organisations that navigate the current disruptions, while continuing to plan with a long-term lens, will be best positioned to take market share when conditions settle," Fried said.

TMX Transform also highlighted several pressures affecting industrial development and occupancy, including data centres competing for greenfield land, electricity infrastructure and labour; the increased use of rise-and-fall clauses that pass material cost risk from developers to tenants; and internal approval delays that add to project cost exposure.

Fire approval complexity for automated facilities was also flagged as an ongoing issue for occupiers. The report suggested these factors could affect the pipeline of ready-to-occupy industrial stock.

Project delivery remains sensitive to planning and procurement decisions, according to the consultancy. Angus Perry, Executive Director of Project Services, TMX Transform, said outcomes depended heavily on preparation. "With proper planning and foresight, you can ride this bump. Where we have sat down with a client, developed a robust plan and executed strategically, we have managed to navigate this period with no additional cost," Perry said.

Charlotte Jordan, Executive Director of Supply Chain, TMX Transform, said businesses should use the current period to test where their networks are vulnerable. "Use this period to genuinely understand your supply chain. Not just the obvious pressure points, but the ones you haven't looked at - supplier concentration, network performance under different cost scenarios, and operational readiness for automation. If you can build that picture now, you are in a far stronger position to stabilise and increase profitability," Jordan said.