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E-commerce drives demand for industrial space

E-commerce is lifting demand for warehouse and distribution space, with property firm JLL’s latest figures pointing towards take-up of industrial space nationally being on track for a record result in 2017.

Over the past 10 years, annual industrial take-up averaged 1,165,700 sqm. Over one million square metres of industrial leases were recorded in the first half of this year alone. Since 2015, the annual gross take-up recorded by the retail, wholesale and the transport, postal and warehousing sectors has been 54 per cent above the 10-year average.

According to JLL Research, gross take-up continued at elevated levels in 2Q17. Total take-up activity in the year was led by Sydney (510,000sqm) and Melbourne (377,237sqm) markets. Brisbane showed a notable improvement in leasing demand with 219,731sqm in leases taking place in 1H17.

“We are seeing retailers increase investment into their supply chains and go through the process of evaluating their supply chain requirements,” said Michael Fenton, JLL’s head of Industrial Australia. “The requirements from fulfilment centres will evolve as retailers look to capture a greater volume of online sales.”

Fenton said as margins continue to come under pressure from online sales and the entry of foreign players, retailers will look for ways to streamline their cost structures. This will involve the integration of their brick-and-mortar and online sales channels.

“From a logistics perspective, the key will be having well-located distribution centres to service their shops and customers directly,” he said. “This is leading to a net increase in the demand for quality distribution space.”

Fenton said the current competition for online sales will renew focus on delivery times and costs to the consumer.

“As such, retailers are now striving for more efficient logistics networks, involving a renewed focus on rebalancing their in-store and industrial requirements.”

Sas Liyanage, JLL’s research manager, said despite the headwinds faced by the in-store retail sector, logistics requirements have continued to climb in recent years. The growth in online sales has transpired in industrial demand.

“Over the past 10 years, gross absorption from the retail, wholesale and the transport, postal and warehousing sectors would account for 56 per cent of leasing activity,” Liyanage said. “In 1H17, they have accounted for 72 per cent percent of national take-up. We believe retailers will continue to invest in their e-fulfilment capacities to safeguard themselves against the threat from well-equipped international and online retailers.”

This story first appeared on our sister site, Inside Retail Australia.

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