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​​Logistics & Industrial Australian Occupier Market 2024 Outlook​ ​​Logistics & Industrial Australian Occupier Market 2024 Outlook​

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Logistics & Industrial Occupier Market 2024 Outlook

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Unpack our view on the direction of the Australian Logistics & Industrial Occupier Market, including demand, vacancy and rents, as well as the trends that influence demand going forward.  

 

2024 Outlook

Following three years of unprecedented growth, demand for warehouse space has returned to normalised levels over the past six months, albeit it has settled higher than pre-pandemic benchmarks. 

Macroeconomic headwinds such as stickier-than-expected inflation, slowing consumer consumption and elevated debt costs represent challenges for most occupiers, bookended by continued supply chain volatility. However, demand drivers such as increased e-commerce adoption, a focus on supply chain optimisation and resiliency, population growth, and the further investment in transport infrastructure will continue to support leasing demand.

Key Themes

Key Outlook Summary

  • Warehouse gross take-up is expected to total 3.0-3.2 million sqm in 2024 before picking up to 3.5-3.7 million sqm in 2025.
  • Despite the increase in speculative supply, high pre-commitment levels mean vacancy rates in all cities will remain under the market equilibrium of 5.0% over the next 12 months
  • Rental growth is forecast to continue to outpace historical benchmarks, with growth of approximately 6.0% forecast for 2024 and 5.0% for 2025. Land-constrained markets where supply is more limited are forecast to see growth rates in excess of this.
  • Occupiers are increasingly using real estate as a lever to help control other costs. This will continue to drive demand for well-located facilities where transport cost savings can be achieved. In most cases, occupiers are willing to pay a higher rent if it facilitates cost savings in other areas of the supply chain, such as outbound logistics costs.
  • Over the next few years, increased automation and technology adoption will support leasing demand in greenfield markets and those with pre-commitment availability. This will be driven by the bespoke needs of the end user, as automation is more challenging to implement in existing facilities.

Sector Outlook

The demand for warehouse space is imbedded in consumer needs and interplays with the current economic cycle. Notably, demand can be broken down into three categories: everyday consumption, cyclical spending and sector structural trends.

Over the next two years, sector structural trends such as e-commerce, manufacturing and health/pharmaceutical are expected to underpin warehouse demand. Alternatively, demand from cyclical spending is anticipated to be more subdued in 2024, before improving in 2025 as economic growth recovers. 

Solving the outbound logistics side of the equation

Inbound and outbound logistics costs are the highest costs for most occupiers, particularly for high volume occupiers such as retailers and transport and logistics operators who deliver direct to the customer. For this reason, rents for business-to-customer (B2C) occupiers need to be considered in context with customer reach, which essentially measures how much rent you pay to service your 30-minute catchment.

On a population reach basis, rents select infill markets of Sydney represent a 40%+ discount to select non-infill markets. The catalyst for this is that infill precincts can service a much larger population in a 30-minute drive time, which more than offsets the higher associated rental costs given the transport cost savings.

Assessing rents through this lens supports the continued rental growth in infill markets; however, occupiers are looking at their overall supply chain costs to do so.

Prime Gross Rent Per 100,000 Residents, by Select Precincts

 

Logistics & Industrial Australian Occupier Market 2024 Outlook

Modern Warehouse Design Trends

The way in which a warehouse is used has changed in recent years, brought about by the growth of e-commerce, a focus on sustainability and more bespoke user requirements. Some of the top trends and changes being incorporated into warehouses today are highlighted below.


 

Contacts

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Tony Iuliano

International Director, Head of Logistics & Industrial, ANZ
Sydney, Australia


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David Hall

National Director, Head of Brokerage, Logistics & Industrial, ANZ
Sydney, Australia


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Luke Crawford

Head of Logistics & Industrial Research
Australia


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Caitlyne Parnis

Executive, Brokerage Logistics & Industrial - Sydney West
Parramatta, Australia


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