WHO SAID CLICKS WOULD KILL MORTAR AND BRICKS?

Written on the 17 September 2015 by Nick Nichols

WHO SAID CLICKS WOULD KILL MORTAR AND BRICKS?

THE rise of online retailers was meant to spell the end for bricks and mortar assets but, according to new research from CBRE, this couldn't be further from the truth.

CBRE Viewpoint estimates that online commerce is likely to drive demand for as much as 3.2 million square metres of Australian industrial space by 2020.

The report, which looks at how industrial demand has fared in recent decades following a slump in domestic manufacturing, has found that online sales have been the saviour of an otherwise challenging industrial market.

Over the four years from 2011, online retail sales have grown from $10.5 billion to 17.3 billion in FY15, or at a compound growth rate of 13 per cent a year.

According to CBRE senior research analyst Alexander Tan, the growth has coincided with rising demand for warehousing and distribution space.

Tan estimates an extra 2.3 million to 3.2 million square metres of space will be required by 2020 to keep up with demand.

"To put this into perspective, CBRE Research recently identified that 3.6 million square metres of industrial space would be vacated as a result of the closure of car manufacturing in Victoria and South Australia," Tan says.

"The forecast uplift in industrial demand over the next five years alone has the potential to offset most of the industrial space loss from car manufacturing."

Tan says the main thrust of growth will come from Australian retailers 'playing catch up' in the online space.

Australian retailers significantly lag their international counterparts with e-commerce representing just 3.1 per cent of total retail sales. This compares with 12.4 per cent in the UK and 7 per cent in the US.

"We expect that Australian online retail trade is likely to catch up to the US and UK over the coming years," Tan says.

"The recent declines in the Australian dollar should provide a boost to domestic online retail trade as domestic goods become relatively cheaper, reducing the volume of imported goods while increasing exports."

CBRE expects national warehouse demand to grow by 540,000sqm per annum by 2020, with NSW, Victoria and Queensland the most likely states to benefit due to higher rates of online purchases.

Third-party logistics groups are currently driving demand, largely because e-commerce companies are not yet comfortable enough with the pace of growth to commit to long-term leases.

"However, this is likely to change in the medium term as the Australian market matures and more regulated growth is achieved," says Jason Edge, CBRE's national director of industrial and logistics services.

Edge says online businesses typically had annual turnover of less than $1 million in their first few years of operation, which puts a cap on their immediate warehousing requirements.

"This presents an opportunity for landlords to position their industrial unit estates to cater to entrepreneurial online retailers with requirements for less than 1000sqm of space in more infill locations," he says.

 


Author: Nick Nichols

Latest News

PROFIT BOOST FORECAST AT VILLA WORLD

VILLA World has forecast profit growth of 5 per cent in the first half of FY17 in an earnings guidance released to th...

WP CURVE SOLD TO GODADDY

NASDAQ-listed tech company GoDaddy has bought Gold Coast's WP Curve for an undisclosed sum.

The subscription-b...

BOARD SHAKE-UP TAKES OUT SURFSTITCH FOUNDER

ONLINE actionwear retailer SurfStitch Group (ASX: SRF) has announced a major board shake-up in a move that effectivel...

ORIGIN TO DIVEST UPSTREAM OIL AND GAS BUSINESS

ORIGIN Energy will spin off its upstream oil and gas business in an as-yet unpriced IPO.

It will allow the Sydney-...

Related News

HOW MCDONALD'S AUSTRALIA REDISCOVERED ITS INNOVATIVE SPIRIT

MCDONALD'S is such a ubiquitous part of the Australian landscape today that it is easy to forget how it change...

JB HI-FI IS THE GOOD GUY IN $870 MILLION ACQUISITION

ELECTRONICS giant JB Hi-Fi has formally completed its $870 million acquisition of home appliance chain The Good Gu...

ACCC ACTS AGAINST MERITON'S RIGGED REVIEWS

MERITON Property Services is under fire from Australia's main consumer watchdog, after it allegedly engaged in mi...

ACCC FIRES WARNING SHOT TO IVF PROVIDERS

IVF clinics have been put on notice by consumer watchdog, the Australian Competition and Consumer Commission (ACCC...

Contact us

Email News Update Sign Up Contact Details

Subscribe to our mailing list

* indicates required
Email Format

PO Box 2087
Brisbane QLD 4001

LoginTell a FriendSign Up to Newsletter