Record online sales during pandemic keeps demand high for industrial property
The take-up of industrial space in Australia is set to exceed 2.2 million square metres in 2020 as a result of a record-breaking $10 billion increase in online retail sales over the past 12 months.
The prediction is contained within a new report from JLL, eCommerce Supporting the Industrial & Logistics Sector.
The $10 billion increase in online retail spending over the past 12 months is well above the average of $2 billion a year. It’s also the first time online retail spending in the country has reached $40 billion a year, according to NAB.
If the 2.2 million-square-metre figure is met, it will be the sixth year in a row where take-up of industrial property has exceed the 10-year average, despite the real estate sector facing significant disruption and uncertainty during the COVID-19 pandemic.
Industrial take-up in 2019 exceeded 2.5 million square metres.
For the first time, occupiers within the retail sector contributed the largest slice of the take-up, at 42 per cent or 800,000 square metres.
Initial analysis suggests the boost in online sales may not be confined to the lockdown period, where access to physical retail stores was limited.
“COVID-19 has merely accelerated the existing upward growth trend in the online penetration rate which has been a structural change over the past decade, ” report author and JLL research director Sass J-Baleh said.
“Over the past two months most of the country has since been out of lockdown and we have still observed stronger e-commerce penetration rates, which indicates the transition to online continues to be a structural movement for the sector – i.e. a long-term change,” she added.
The overall economic conditions of 2020 have seen the volume of capital allocated to the industrial and logistics sector grow beyond previous record levels.
In Australia the share now represents 27 per cent of total real estate investment, compared with the global figure of 19 per cent, and now surpassing the volumes recorded within the retail sector.
Ms J-Baleh said increased investor interest in the sector was partially being fuelled by Australia’s solid economic fundamentals.
“The Australian market offers a liquid, stable and strong return performance trend, low interest rates, a weak Australian dollar, and robust growth relative to other countries mainly supported by infrastructure expenditure and long-term population growth,” she said.
“Further, several core gateway markets within the Asian region face limited availability of industrial stock which further makes Australia an attractive investment destination.”
