Online Retail Drives Industrial Demand Up 35pc

An extra 500,000sq m of industrial space is needed each year to accommodate Australian consumers’ appetites for online retail.

A CBRE report into the exponential growth of e-commerce and its impact on the industrial and logistics market has forecast an additional 35 per cent more space would be required to meet demand over the next five years.

CBRE head of industrial and logistics research pacific director for NSW research Sass J-Baleh said the e-commerce sector had been booming in the past five years, but Covid-19 had stepped up demand significantly.

“The e-commerce sector globally has increased significantly between 2015 and 2020, by around 140 per cent (or US$1.4 trillion), and now makes up 18 per cent of global retail sales,” she said.

“Over the same period, Australia’s ecommerce sector increased by 105 per cent (or A$22.6 billion) and now accounts for 13 per cent of total retail spend.

“Although Covid-19 has accelerated the upward trend of the e-commerce penetration rate, Australia still lags behind other major countries and below the global average rate of 22 per cent.”

Growth in online retail: Australia

The research report forecast an e-commerce penetration rate of at least 20 per cent by 2025, a 7 per cent increase over the next five years.

“If Australia reaches an e-commerce penetration rate of 20 per cent by 2025, this will equate to around $79 billion in online sales … a $34.8-billon increase,” J-Baleh said.

“Around 490,000sq m of space per annum will be required to 2025.

“Historically, an average of 1.4 million sq m of space has been delivered to the Australian market each year since 2010 … [but] to cater for the growth in e-commerce, new supply will need to be elevated by 35 per cent.”

Sydney and Melbourne maintain the lion’s share of the industrial and logistics market, making up 58 per cent of the national total, according to CBRE data.

The report indicated occupier requirement would skew further toward the eastern seaboard into the future.

Online sales during the Covid-19 pandemic led to an all-time high industrial floorspace absorption rate of 1 million sq m last year.

The report also indicated capital and rental value uplift would be likely as vacancy rates tighten further over the next five years.