Colliers’ latest Industrial Outdoor Storage Investment Proposition report identifies relatively low building costs, the potential for rental growth and land appreciation as key attractions.
We spoke to Sean Thomson, Colliers National Director, Industrial & Logistics Capital Markets, about the forces driving demand and how the market is likely to evolve.
Good land is hard to find
With less than one-quarter of industrial-zoned land across Australia’s mainland capital cities still undeveloped, suitable sites are becoming increasingly constrained.
Just 19% of undeveloped industrial land in Sydney, Melbourne and Brisbane is in infill locations.
Transport and logistics account for about half of national IOS use, but new players are entering the field.
Data centre operators and contractors leased more than 130,000 sqm of hardstand in the first half of 2026.
Australia’s $242 billion five-year infrastructure pipeline is expected to further bolster demand.
Mr Thomson said land scarcity was a major tailwind for IOS.
“Well-located, appropriately zoned industrial land is becoming increasingly difficult and expensive to secure, particularly in infill markets,” he said.
“This is supporting stronger rents and land values, while making existing IOS assets increasingly difficult to replicate and enhancing their long-term redevelopment potential.”
Less lost to costs
Scarce land is only part of the investment case. IOS also offers exposure to industrial property with less capital tied up in buildings.
More than 70% of a typical IOS asset’s value sits in the underlying land, while buildings cover less than 30% of the site.
That smaller building footprint can limit maintenance and upgrade costs compared with traditional industrial property.
“IOS offers attractive income retention, lower building-related capital expenditure and exposure to underlying land value growth,” Mr Thomson said.
“Colliers estimates a 6.22% headline yield and 5.29% effective yield with a 93-basis-point spread, compared with 135 basis points for prime industrial and 210 basis points for secondary industrial assets.”
More than one way to win
Investors can also pursue value beyond rental income and land appreciation through site improvements, better lease terms and potential redevelopment.
Colliers estimates bitumen can command a 5-15% premium over crushed rock, while concrete can attract a 20-40% premium and container-rated hardstand a 50-95% premium over crushed rock in suitable locations.
“The biggest opportunities to add value are through rental reversion, improving site utilisation and lease structuring,” he said.
“There is also significant upside in acquiring underutilised land, improving the income profile and retaining long-term redevelopment or higher-and-better-use optionality as land values increase.”
The big money moves in
Industrial investors are taking notice. Their participation has grown at a compound annual rate of 9% since 2023, and they accounted for 56% of transactions above A$10 million over the past three years, according to Colliers data.
Mr Thomson expects the influx of institutional capital to intensify competition for assets and support the sector’s further development.
“As more capital enters the sector, we expect stronger competition for quality assets, yield compression and further rental growth, particularly in land-constrained infill markets.
“The sector should increasingly be recognised as a core industrial investment class rather than a niche alternative.”
