Industrial Warehouse Space in Australia on the Upswing

Warehouse sector rides on back of online sales boom

May 26, 2012AmazonBig opportunity … the Amazon site in Germany owned by Goodman Group, which is working on the retailer’s expansion. 

INDUSTRIAL warehouses are undergoing a renaissance thanks to the rise of internet shopping.

While the fact that more than 10 per cent of sales are made online will not make a bricks-and-mortar retailer happy, it’s a boost for the industrial property market, which was flagging only a few years ago.

According to property investors, returns from owning a medium to large distribution centre are rising to attractive levels, thanks to the lack of supply and high demand.

In Sydney’s south, the shift in preference back to the warehouse sector has brought a seismic change in the attitude of developers.

The manager, industrial, at Jones Lang LaSalle, Paul Mileto, said despite increasing demand, there is a lack of institutional-grade assets and the supply pipeline is limited.

Mr Mileto said some big industrial occupiers were pre-leasing space in the area to gain a foothold in the market.

Jones Lang LaSalle has been working closely with Goodman Group to negotiate pre-leases for several tenants in recent months.

Recently Mr Mileto and the Goodman development manager Mike Hercus negotiated a large pre-lease in the highly sought after Moorebank Business Park.

Goodman is also working with the giant Amazon group in Europe and Asia as it expands its global business. Amazon is said to be also looking in Australia for appropriate sites to store and distribute goods bought through its website.

A report commissioned by Goodman on the impact of e-retailing on the industrial sector says online shopping accounts for almost a fifth of all purchases in developed markets and is growing between 15 and 20 per cent a year.

The growth rate in developing economies is far higher, with China, for example, experiencing about 75 per cent growth a year, said a report conducted by the researcher Transport Intelligence.

The report showed that at a time when retail sales in many markets have been sluggish, internet retailing has grown rapidly and this shift in consumer attitude has brought enormous benefits to the global logistics market.

”With growth in excess of 10 per cent per annum in developed economies and more than 30 per cent per annum in many less developed areas, e-retailing is at present in the rapid growth phase, with little sign of levelling off,” the report says.

The Goodman Group chief executive, Greg Goodman, said the research had enabled his group to better understand the key drivers in the e-retailing market globally and the trends that were shaping the industry, including logistics operators.

”What is very apparent is that there is no ‘one size fits all’ approach to optimising distribution efficiency, with e-retailers in different markets adopting very different fulfilment and distribution strategies,” he said.

“The continued rapid growth in e-retailing is a real game changer for our business.

”We have undertaken a number of developments for the e-retailing sector over the last two to three years, which is reflected across our portfolio, making it one of our largest customer groups.”

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