If there was ever a time that logistics was ‘in’, that time is now. The reliance and need for logistics space is at an all-time high, driven by advancements in the e-commerce sector.

The heightened emphasis on supply chain efficiency and effectiveness over the past 12 months in a bid to deliver goods with speed and agility for Australian consumers has, and will continue to have, positive spillover effects on the industrial property market.

A “prime” example of fulfilling this customer value proposition is through Australia’s newest and significant entrant — Amazon.

This year’s Amazon Prime Day was one of the largest global shopping events in Amazon history – taking place across 17 countries with more than 100 million products purchased. That is a lot of physical goods circulating within warehouses and being transported across local, domestic and international distribution networks.

Over the year to July 2018, the transport/logistics and retail sectors combined have accounted for just over half of the total take-up of industrial floor space in Australia. Major e-commerce players, as well as the retailers which have adopted a dual strategy (i.e. physical and online retailing), are currently in a bid to differentiate themselves in a market that is in an “introductory” e-commerce growth phase – unlike the US where e-commerce growth has matured. New entrants are doing this by seeking to build their consumer base, increase their product offerings, and reduce the standard delivery period – which is currently an offset between higher delivery speed and lower transport cost borne by the consumer.

Figure 1: Industrial Take-Up in Australia, by Industry (2008 to 2018YTD)Source: JLL Research

Major e-commerce and logistic players have been on the move to secure logistics space to efficiently fulfil orders – encompassing orders domestically received and/or orders that require overseas export distribution.  This has spurred a renewed appetite for pure industrial space in inner ring locations – optimal for the last leg of delivery.

Sydney, being the most densely populated city in Australia and having the most constrained supply of industrial land, has recorded the strongest rate of annual take-up of industrial space within the inner sub-markets.  Between 2013 and 2017, industrial take-up within Sydney’s inner locations by transport, logistics and e-commerce sectors has recorded a five-fold increase.

Figure 2: Sydney Inner West Sub-Market Take-Up (2017)Source: JLL Research

There is no doubt that major e-commerce players will improve their offerings and further develop and expand their logistics and supply chain network in Australia.  This, along with the projected growth in the e-commerce sector, will ultimately mean an increasing volume of physical goods circulating – and industrial space is at the forefront in capturing the positive spillovers from this expansion.

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