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Industrial property landlords preparing for Amazon impact

Posted on 22 November 2017

Source:  Brisbane Times

The imminent arrival of online giant, Amazon, has seen a surge in demand for industrial warehouses, with gross leasing activity accelerating past historical benchmarks in the third quarter of 2017, according to JLL research.

This has been particularly prominent along the eastern seaboard.

Amazon has its first base in Dandenong, in south-east Melbourne, and is said to be preparing for a pre-Christmas "launch". It is believed to be looking at a site at Eastern Creek and another at Camden, in south-west Sydney.

At the third-quarter mark, gross leasing activity in the Sydney market had already exceeded long-term annual take-up volumes. In Melbourne and Brisbane, gross leasing volumes are close to the annual 10-year average. 

Michael Fenton, said there have been about 1.7 million square metres of leases recorded in Sydney, Melbourne and Brisbane over the first three quarters of this year.

"This is typically what we would expect to see over the entire year," he said. He added that the strong online retail spending is underpinning warehouse demand in these sectors, particularly as many Australians are making their online purchases from retailers in other countries.

Some of the latest leases have been by the third-party logistics businesses, such as DHL and recently DB Schenker,which leased a former 50,000 sq m Bunnings store at Hoxton Park.

In Sydney and Melbourne, leasing demand was led by the retail sector, wholesale sector, transport, postal and warehousing sectors.

As at the end of September, 2017, the sectors have accounted for 76 per cent of the overall leasing volumes. This is above the longer-term averages, where these three sectors would account for 61 per cent of take-up on average.

Occupiers in Sydney continued to demonstrate the strongest demand, with leasing volumes recording a third consecutive year above the long-term average. The year-to-date gross take-up of 749,000 sq m has exceeded the market's typical 10-year annual average of 686,000 sq m.

The year-to-date take-up figure for Melbourne is 555,877 sq m, which has nearly reached the 10-year annual average of 574,973 sq m. Melbourne is also expected to have three consecutive years of gross take-up volumes above the 10-year average.

According to global IT services company Pitney Bowes, all this shopping is fuelling a boom in global parcel volumes.

Parcel volumes in Australia grew 13 per cent from 2015-16 year-on-year and it is projected that the Australian parcel market will grow to more than 1 billion parcels a year in 2021.

Goodman Group chief executive Greg Goodman has estimated that online sales will grow about 60 per cent in coming years, with global retail spending forecast to grow 20 per cent to $US27 trillion by 2020.

"E-commerce sales are expected to grow at three times the rate of traditional sales," Mr Goodman said.


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