OVERVIEW
DEFINING TOMORROW
LOGISTICS & INDUSTRIAL CAPITAL MARKETS 2025 OUTLOOK
Following two years of pricing dislocation and muted transactions volumes as capital sat on the sideline, 2025 is shaping up to be a dynamic year for Australia’s L&I Capital Markets.
Further rate cuts in 2025 will provide the backdrop to improved liquidity, with a material jump in investment volumes forecast, supported by new capital sources from offshore markets. The growing weight of capital seeking to be deployed into Australian logistics is expected to see the emergence of yield compression in late 2025 – a trend that is already occurring in several major markets globally.
Australian L&I Annual Investment Volumes ($ Billions)
National Prime L&I Yield Outlook
KEY THEMES
2025 OUTLOOK | SIX KEY THEMES FOR 2025
WHY NOW
WHY NOW? PAY ATTENTION TO HISTORY
The experience from previous cycles indicates that L&I acquisitions made during the bottom of the market provided a 450 basis point premium on average above long-term benchmarks in the following five-year period.
In our view, this will remain the case in the next cycle as the sector potentially enters a yield compression cycle in the second half of 2025, which in combination with sustained rental growth, will drive a period of accelerated value growth.
Key themes that underpin this outlook:
- Pricing has been reset: The repricing cycle has run its course and presents the opportunity for investors to buy in at a discounted yield for stronger future returns once interest rates are cut. Values have already turned the corner, led by continued rental growth.
- Yield compression cycle to commence: A 100 basis point reduction in the cash rate over the next two years (C&W Research House View), in combination with the real bond rate falling to approximately 1.5% by the end of 2026, is expected to drive approximately 60 basis points of L&I yield compression over the next two years.
- Capital to become more active: A significant volume of dry powder is waiting to be deployed, with logistics remaining a high-conviction investment sector. Capital that has sat on the sidelines over the past years has returned to the table and is participating again, supporting yield compression as demand is expected to outstrip availability.
- Timing: Higher entry yields, potential for falling interest rates, strong fundamentals and a diminished supply pipeline all point towards a period of recovery and elevated returns.
REPORTS
OUTLOOK 2025 REPORTS
Research • Investment / Capital Markets
Australian Alternatives Outlook 2025
Research • Investment / Capital Markets
Australian Outlook 2025 Reports
Research
Australian Office Outlook 2025
CONTACTS
AUTHORS
NATIONAL CAPITAL MARKETS LOGISTICS & INDUSTRIAL
Chris Jones
National Director, National Capital Markets, Logistics & Industrial
Melbourne, Australia
Charlie Holmes
Associate Director, National Capital Markets, Logistics & Industrial
Melbourne, Australia
OUTBOUND CAPITAL LOGISTICS & INDUSTRIAL
