As prime industrial land near Australia’s major cities runs short, businesses are rethinking what a warehouse is for, and how much it can deliver from a smaller site
Well-located industrial land near Australia’s major cities is getting harder to secure, and the businesses that depend on it are being forced to think differently about what a warehouse needs to do. CBRE forecasts national industrial vacancy will peak at just 3.6 per cent in the second half of 2026[1], still below the long-term equilibrium of four per cent, with demand for modern, well-specified facilities continuing to outstrip supply in the most sought-after locations.
For retailers, food and beverage manufacturers, third-party logistics operators and e-commerce platforms, the implication is direct, particularly for their warehouses, which are critical for business continuity and ensuring customers’ orders are fulfilled fast, accurately and at the lowest cost. Warehouse location and design, once delegated to property and supply chain teams, is increasingly a strategic conversation taking place at board level.
“The question is no longer simply where to build a warehouse. It is how much capacity and throughput you can get out of every square metre of industrial land you can secure. The days of solving a capacity problem by leasing an extra shed down the road are largely over. The answer now has to come from within the site you already have,” said Dave Rubie, Sales Director, Integrated Systems and Mobile Automation at Dematic.
The forces tightening the market are not cyclical. Proximity to population centres is becoming more valuable as customer delivery-speed expectations rise and transport fuel costs remain elevated. Infill sites near ports and highway interchanges are limited by geography, competing land uses and planning constraints that are unlikely to loosen. Even as headline vacancy has edged upwards, the areas that matter most, including Sydney’s South, Melbourne’s South East and the Port of Brisbane industrial corridor, have continued to command rental growth and minimal availability.
For any business planning a major warehouse investment in 2026, the question is not whether to pay a premium for a well-located site, but how to make that site deliver enough capacity and future flexibility to justify the investment over a 20 to 30 year horizon.
One of the most visible responses is vertical. Where a conventional single-storey warehouse might store 5,000 to 10,000 pallets across a sprawling footprint, automated storage systems can hold tens of thousands of pallets on a fraction of the land, at heights of 30 to 45 metres.
Americold’s Spearwood facility in Perth, which supplies Australia’s major grocery retailers, shows what this looks like at scale. At 45 metres high, it is among the tallest warehouses in the southern hemisphere, a design driven by the economics of a constrained site and the need to fit more product on less land.
Dematic, which has operated in Australia and New Zealand for close to six decades and designed and installed the automated systems at both the Spearwood facility and Diageo’s consolidated Australian distribution centre, says the land crunch is accelerating a shift in how its customers are approaching major warehouse investments.
“Height is the most visible part of the story, but it is not the whole story. A dense warehouse only delivers value when you can actually get product in and out at the speed the business needs and customers expect. That is what automation does. It makes density usable,” said Rubie.
The second strategic response is consolidation. Businesses operating multiple warehouses across a region, often a mix of owned facilities and third-party logistics sites accumulated over time, are examining whether the same service levels can be delivered from a single, automated site.
Global beverage and spirits company Diageo’s Australian operation pursued exactly this approach, consolidating a dispersed network of storage facilities into a single automated distribution centre 12 years ago. The operational benefits extended well beyond real estate: fewer inter-site truck movements, lower safety stock requirements and simpler inventory management. More than a decade on, the decision looks increasingly prescient. As industrial land has tightened and transport costs have climbed, the facility has given Diageo the kind of adaptability that businesses still running dispersed networks are now scrambling to build.
For food and beverage manufacturers, the ability to build a tall, automated warehouse next to a production facility, often on land already owned by the business, has proven to be one of the most valuable strategic moves available. It sidesteps the land acquisition challenge entirely and removes significant road freight from the supply chain.
For retailers, locating warehouse and fulfillment centres close to customers, be it stores or ecommerce customers, helps them stay ahead of local and global competition in terms of fulfilment speeds and logistics costs while ensuring orders are error free, driving customer loyalty.
In a market where land is constrained, labour is constrained and energy is expensive, the traditional approach of building bigger, leasing more and adding more trucks is running into hard limits. The businesses moving first are approving warehouse investments that cost more up front, occupy less land, move product faster, and deliver a cost advantage that compounds over the life of the asset.
“Every major warehouse investment being approved right now is effectively a bet on what the next twenty years look like. The better bets are being made by businesses treating this as a strategic conversation, not a real estate transaction. The site you choose today is the site you will have to run your supply chain from for a very long time,” said Rubie.
For more information visit https://www.dematic.com/en-au/
