New supply will need to be elevated by 35% to meet e-commerce demand, according to CBRE. Image – Canva.
  • Online sales accounted for 13% of retail sales in Australia last year - up from 7% in 2015
  • Lockdown in Melbourne saw online sales rise by 82% in 2020
  • Australia among the top ten nations globally for forecasted e-commerce penetration growth

In order to accommodate the ongoing growth of online shopping, nearly an additional 500,000sqm of industrial and logistics space annually will be required, according to a new report from CBRE.

Thanks to a surge in e-commerce driven by the pandemic, online sales accounted for 13% of all retail sales across Australia last year – almost double compared to 7% back in 2015.

Australia is forecast to become a major mover globally in regards to e-commerce penetration over the next few years, with retail-related floorspace absorption reaching around 1,000,000sqm – an all-time high.

CBRE’s Australia’s E-commerce Trend and Trajectory outlines the impact e-commerce will have on industrial and logistics supply, with Sass J-Baleh warning Australia’s supply pipeline currently points to a shortage in new space required to meet expected growth.

“We forecast that an additional 490,000sqm of space per annum will be required over the next couple of years to support the growth of internet sales, which are expected to reach 20% of total retail sales by 2025,” she said.

“An average of 1,400,000sqm of space has been delivered to the Australian market each year since 2010. Based on that, to cater for the growth in e-commerce, new supply will need to be elevated by approximately 35%.”

Sass J-Baleh, CBRE

Additionally, the report highlights the impact lockdown measures have had on e-commerce-related tenants.

For example, in Q1 2021, Melbourne accounted for more than half of the total industrial and logistics space absorbed in Australia, 25% of which was from the retail trade sector.

This correlates with Australia Post data that reveals online sales in Victoria rose by 82% during 2020 and accounted for 36% of all sales between July and October.

Australia among the top 10 for e-commerce growth

The report notably places Australia among the top ten countries globally for forecast e-commerce penetration growth between 2020 and 2025.

Another CBRE report, Global E-commerce Drivers Index 2021, has also ranked Australia relatively high although well behind many nations such as New Zealand, France, Canada, South Korea and the United Kingdom.

“Although Australia ranks reasonably high in most of the six factors, it scores relatively lowly in ‘mobile internet sales ratio’ at 37% and weak in ‘dominant e-commerce player’ – particularly as Amazon’s impact in the Australian market has not yet matured,” Ms J-Baleh added.

“The stronger presence of an e-commerce player is expected to rapidly develop and this will further drive the e-commerce penetration rate over the coming.”

Chris O’Brien, CBRE’s Head of Capital markets, Industrial & Logistics, said major investors are continuously eyeing growth in the sector, with both sale and leaseback arrangements emerging as a major trend last year.

An example includes the $137.1 million sale of VidaXL/HB Commerce site in Melbourne to GPT which had a leaseback that representing a yield of 4.08%.

“There is unprecedented demand for assets that are strategically positioned to accommodate fulfilment centres and last mile distribution hubs, as e-commerce growth is front of mind,” Mr O’Brien said.

“On the back of the e-commerce growth story, we will see persistent increase in capital values, further yield compression, and rental growth.”

Chris O’Brien, CBRE

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