Recently, I detailed the 250-year rise of the industrial property sector, a transformation that has seen it evolve from the physical backbone of early manufacturing and storage into one of the most critical forms of modern economic infrastructure.
While this evolution provides important context, it is only part of the story.
In this article, we examine seven forces that will define the sector across coming decades. For investors, understanding these dynamics is key to identifying where industrial property demand is heading, and how to position for the next phase of growth.
Exploding data volumes are emerging as one of the most powerful drivers of industrial property demand. Cloud computing, streaming services, artificial intelligence and enterprise data storage are all underpinned by physical infrastructure, primarily data centres. These assets are highly specialised industrial facilities that require significant power capacity, advanced cooling systems and robust connectivity.
As data creation accelerates exponentially, operators are expanding both hyperscale and edge computing networks, driving demand for strategically located, energy-intensive sites. Unlike traditional warehouses, data centres prioritise power and connectivity over proximity to transport corridors, further diversifying the industrial asset base.
Australia ranks in the top ten for data centres globally, with 270 across the country and a healthy development pipeline.
For investors, data centres illustrate the way in which emerging digital infrastructure requirements are reshaping industrial property demand and expanding the sector’s growth drivers.
Increasing global defence expenditure is introducing a more specialised and strategic layer of demand within industrial property. Governments are increasingly investing in sovereign capability, secure supply chains and domestic manufacturing across defence, energy and critical infrastructure sectors.
This shift is translating into demand for highly secure, purpose-built industrial assets, including logistics hubs, storage facilities and advanced manufacturing sites. These facilities often require bespoke design specifications, enhanced security protocols and proximity to key transport or military infrastructure, making them both capital-intensive and difficult to replicate.
As geopolitical tensions persist, the need for resilient, domestically anchored logistics networks continues to grow. For investors, exposure to defence-aligned assets offers access to long-term income streams, underpinned by government or government-linked tenants, while reinforcing the sector’s broader shift toward strategic, non-discretionary use cases.
The continued growth of e-commerce is reshaping demand across every layer of the logistics network. As at June 2025, Australian Bureau of Statistics data showed online retail penetration in Australia had reached 12.7%, representing a structural shift in how goods are moved, stored and delivered.
While this penetration rate marks an all-time high domestically, penetration remains below countries such as Mexico, Russia, China, the United States and United Kingdom, indicating further growth potential. As online retail expands, logistics networks become more complex and transport-intensive, increasing demand for modern industrial facilities that can accommodate higher order volumes, faster fulfilment, higher clear spans, increased automation, faster throughput, more fragmented delivery profiles, as well as greater storage for ‘just-in-case’ inventory strategies.
Distribution centres are increasingly required to function as fulfilment hubs rather than passive storage, integrating inventory management, transport coordination and last‑mile delivery within a single facility. As these pressures build, industrial assets with scale, flexibility and proximity to population centres play an increasingly central role in retail supply chains. This dynamic is further reinforced by broader forces shaping inventory strategies and supply chain resilience.
Collectively, these trends are reinforcing the structural importance of industrial property in retail supply chains, while supporting sustained rental growth and capital appreciation across well-located, high-quality assets.
The ongoing complexity and sophistication of automation continues to drive refinement across warehouse design and functionality. Industrial facilities are increasingly engineered to accommodate robotics, autonomous vehicles and advanced material handling systems. This is driving demand for larger footprints, higher clear span structures and significantly enhanced power and data capacity.
High specification warehouses capable of integrating automated racking, conveyor systems and robotics are becoming increasingly important for occupiers seeking efficiency gains and cost reductions. As labour availability tightens and wages rise, automation offers a scalable solution, further incentivising investment in technologically forward facilities.
This evolution is widening the gap between the new generation of prime assets and older stock, which may require substantial capital expenditure to remain competitive. As a result, capital is increasingly flowing towards assets that can support the next generation of logistics operations.
While automation improves the execution of physical tasks within industrial assets, the next phase of supply chain evolution is increasingly focused on optimisation and decision making. This is where artificial intelligence (AI) is beginning to play a transformative role, enhancing the efficiency of logistics networks by enabling systems to analyse, predict and respond in real time.
AI-enabled supply chains allow businesses to manage inventory, routing and demand forecasting in real time, significantly increasing operational efficiency. However, these gains require the physical infrastructure capable of supporting faster decision making and higher volumes of throughput.
Distribution centres continue their evolution into increasingly sophisticated fulfilment hubs with the integration of real-time data systems with physical logistics capabilities. This ongoing shift is a demand driver for assets with advanced layouts, high levels of automation compatibility and seamless connectivity to transport networks. This often leads to a more complex and capital-intensive asset profile, where building design and operational performance go hand-in-hand.
Amazon is leading the way in this regard. The Jeff Bezos-led company is targeting 30% to 40% automated order fulfilment by 2030 before automating 75% of its warehouse operations globally by 2033. To support this target in Australia, the retail giant is developing a 209,000 square metre ‘world-leading robotics fulfilment centre’ in Craigieburn, Victoria, in what will be the Southern Hemisphere’s largest industrial facility upon completion.
Heightened geopolitical risk has re‑emerged as a meaningful macro-overlay. Escalating tensions in the Middle East, including conflict involving Iran and increased instability across the region, have heightened concerns over the security of key energy transit routes such as the Strait of Hormuz, reintroducing sustained upside volatility to global oil markets.
Any sustained lift in energy costs would likely feed through to higher transport, production and utility inputs, complicating the global disinflation narrative. For Australia, this creates a risk that inflation proves stickier than currently forecast, increasing the probability that the RBA is required to keep policy restrictive for longer than markets presently assume.
From an industrial property perspective, these dynamics reinforce structural trends already established since COVID-19, rather than reversing them.
Elevated supply‑chain risk, higher freight costs and geopolitical fragmentation continue to support the shift from ‘just‑in‑time’ to ‘just‑in‑case’ inventory management, alongside the selective onshoring and regionalisation of critical logistics and manufacturing functions. This favours greater demand for modern, well‑located industrial assets, particularly warehousing tied to domestic distribution, essential goods and energy‑adjacent supply chains.
While higher interest rates may weigh on near‑term pricing sentiment, the medium‑term fundamentals for industrial property remain underpinned by these resilience‑driven occupier behaviours, providing a degree of insulation relative to more cyclical property sectors.
Population growth remains one of the most reliable and enduring drivers of industrial property demand. As populations expand, so too does consumption, and with it, the need for efficient systems to store, move and deliver goods.
This creates a direct, measurable link between demographic trends and demand for industrial floorspace.
Cushman & Wakefield estimates that for every new person added to the population either through birth / death rates or net migration, an additional 4 sqm of warehouse space is required.
The Centre of Population Projections forecasts that Australia’s population will grow by approximately 400,000 each year between now and mid-2035, resulting in a total population growth of 4 million people.
Based on these figures, demand for industrial floorspace is forecast to grow by approximately 1.6 million square metres annually, for a total increase of 16 million square metres by mid-2035.
This growth will primarily be concentrated in major urban centres, where land constraints and zoning limitations further amplify demand for well-located industrial assets. As a result, population growth is likely to support steady occupancy levels while also underpinning long-term rental and capital growth across core industrial markets.
Industrial property continues its evolution away from its traditional role as a place to store and move goods. Structural drivers including data growth, defence spending, the continued rise of e-commerce, automation, artificial intelligence and supply chain resilience are transforming the sector into increasingly vital economic infrastructure. While cyclical conditions will continue to influence markets in the short term, these long-term forces suggest industrial property remains well positioned to capture enduring demand and support attractive investment outcomes over coming decades.
The Trilogy Industrial Property Trust is designed to provide a competitive and regular income and the opportunity for long-term capital growth.
This article is issued by Trilogy Funds Management Limited ABN 59 080 383 679 AFSL 261425 (Trilogy Funds) as responsible entity for the Trilogy Industrial Property Trust ARSN 623 096 944. Application for investment can only be made on the application form accompanying the Product Disclosure Statement (PDS) dated 3 March 2025. The PDS and Target Market Determination (TMD) dated 27 March 2026 for the Trilogy Industrial Property Trust ARSN 623 096 944 are available at www.trilogyfunds.com.au. The PDS contains full details of the terms and conditions of investment and should be read in full, particularly the risk section, prior to lodging any application or making a further investment. All investments, including those with Trilogy Funds, involve risk which can lead to no or lower than expected returns, or a loss of part or all of your capital. Trilogy Funds is licensed to provide only general financial product advice about its products and therefore recommends you seek personal advice on the suitability of this investment to your objectives, financial situation and needs from a licensed financial adviser. Investments with Trilogy Funds are not bank deposits and are not government guaranteed. Past performance is no indicator of future performance.
While all reasonable care has been taken by the author in the preparation of this information, the author and InvestmentMarkets (Aust) Pty. Ltd. as publisher take no responsibility for any actions taken based on information contained herein or for any errors or omissions within it. Interested parties should seek independent professional advice prior to acting on any information presented. Please note past performance is not a reliable indicator of future performance.
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