inside warehouse
E-commerce has fuelled demand for high-quality storage facilities. Image supplied.
  • Australia has the lowest industrial and logistics vacancy rate in the developed world
  • Online sales is expected to reach 17% of all retail sales by 2026, effectively doubling since the pandemic began
  • Australia scores low for e-commerce penetration, due to low mobile internet sales

A recent report has highlighted the need for significant growth in the logistics and industrial space to meet the demand of online shopping over the coming five years.

This will be a challenge, given that Australia has the lowest industrial and logistics vacancy rate in the developed world, at just 0.8%, with a pipeline that represents 2% of its current supply, according to CBRE’s latest E-Commerce Trend and Trajectory report.

Fuelled by changes in retail habits amid the lockdowns, online sales rose from representing 9% of retail spending in 2019, to 14.3% in July 2022. Forecasts suggest this will reach 17% by 2026.

Australian consumer’s total spending online rose from $30 billion in 2019, to $53 billion last year. It is expected to hit $78 billion by 2026.

Using a formula of 70,000 sqm required to facilitate around $1 billion of online sales, an extra 1,800,000 sqm will be needed to support the sector, according to CBRE.

“E-commerce has grown significantly in the past five years, and that continued adoption requires large amounts of logistics space,” CBRE’s Head of Industrial & Logistics Research Sass J-Baleh said.

“In the case of Australia, the forecast growth equates to needing an additional 1.8 million sqm of space, amid what’s already a chronic shortage of supply and a relatively-limited pipeline of new stock.

“It’s set to fuel rental growth in over the coming years, as occupiers compete for supply, but more broadly there is a question of how to facilitate this growing requirement, including whether it’s possible to unlock alternative space or intensify the use of available space.”

Sass J-Baleh, CBRE

Australia scores low for e-commerce penetration

The report measures six drivers for e-commerce penetration: share of urban population, mobile internet sales ratio, debit and credit card use, digital skills of the population, presence of a dominant e-commerce player, and the broadband penetration of the population.

Australia rates 37 out of 100, scoring lowly due to low mobile internet sales and the lack of a dominant e-commerce player. Australia ranks 14th out of the 31 countries measured.

Mainland China ranks top, on 83, well ahead of the United Kingdom on 69. 13 nations, including Australia, have scores between 30 and 50.

There are signs that e-commerce penetration is easing in some markets, and even falling in the UK. However, the Australian market is less established and is positioned for further growth.

Interestingly, the online grocery sector is set to be one of the biggest drivers over the coming years, with revenue expected to total $17 billion in FY2028, almost double the FY2022 figure.

“Markets with more of the fundamentals in place experienced higher peaks during the pandemic, only for the rate to drop after restrictions eased, whereas Australia’s growth has been sustained,” Ms J-Baleh added.

“Online grocery shopping is an example of changing consumer behaviour, and it accounted for 20% of Australia’s total online retail spend in 2021.

“However, that’s still only 3% of the total grocery spend in the country, highlighting that there’s still significant scope for growth.”

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