Entertainment precincts emerge as inner industrial land tightens

As the NBL season is in full swing, following the recent NBA preseason games in Australia, two major basketball focused entertainment precincts have opened in Sydney and Melbourne highlighting a new trend for inner industrial markets. A 2,000 sqm immersive destination has launched in Alexandria, while Port Melbourne's 9,700 sqm facility combines elite basketball infrastructure with major retail presence. But their significance extends well beyond sports culture, these facilities represent an emerging response to a critical property market challenge: what happens when inner industrial land becomes too scarce and expensive for traditional users.

Australia's inner industrial markets are reaching a critical inflection point. With vacant zoned land down to just 10.8 hectares in Inner Sydney and an estimated 14 hectares in Inner Melbourne, property owners are increasingly turning to entertainment focused tenants capable of justifying the premium land values that traditional industrial users can no longer afford.

The supply constraints are stark. Inner Sydney's 10.8 hectares of vacant industrial land represents just 1.7 per cent of the total 626.6 hectares of zoned industrial land across Bayside and Sydney LGAs. In Inner Melbourne, the situation is similarly tight, with an estimated 14 hectares remaining from 487.4 hectares of zoned land across Port Phillip, Melbourne, and Yarra, assuming minimal consumption of two hectares annually since the last comprehensive survey in 2018. No new industrial land is being zoned in either market.

This scarcity, combined with widespread industrial to residential rezoning creating new urban communities, has created opportunities for alternative uses that can generate the returns necessary to justify current land values. Entertainment precincts with diversified revenue streams are emerging as the natural evolution.

These entertainment destinations represent entirely new asset classes designed to serve the residential communities now calling these former industrial areas home. The model addresses multiple revenue streams that traditional industrial or retail tenants cannot match, retail sales, hospitality operations, venue hire to multiple user groups, corporate events, and brand activations. This diversified income approach provides property owners with stable returns while creating destinations that drive extended dwell times and repeat visits.

Alexandria exemplifies the transformation underway. Once dominated by manufacturing and logistics, the suburb has undergone extensive residential rezoning while attracting a young professional demographic drawn to its proximity to the CBD, airport, and creative industries. This new resident base creates natural demand for entertainment and lifestyle destinations within walking distance, demand that can justify premium rents driven by constrained land supply.

Traditional industrial tenants, facing escalating land costs, are increasingly relocating to outer suburban locations where larger sites and superior logistics access come at a fraction of the cost. This shift is being driven by dramatic land value appreciation that has fundamentally altered the economic equation for property owners in areas like Alexandria and Port Melbourne.

Over the past decade, Inner Sydney industrial land values have surged 223 per cent from $1,175/sqm in 2013 to $3,800/sqm in 2025. Inner Melbourne has experienced even steeper growth of 275 per cent, climbing from $700/sqm to $2,625/sqm over the same period.