Over the next five years, Australia will require an extra 1,800,000 sqm of industrial and logistical space to meet the anticipated rise of online commerce.
However, considering that Australia has the lowest vacancy rate in the world, at 0.8 per cent, and a pipeline that only accounts for 2 per cent of its existing supply, meeting that demand will be difficult.
That is according to CBRE’s latest E-Commerce Trend and Trajectory report.
Total retail sales are expected to increase from 14.3 per cent in July 2019 to 17 per cent in 2026.
In a similar vein, overall online spending by Australian consumers increased from $30 billion in 2019 to $53 billion last year, and is expected to reach $78 billion by 2026.
Applying the rule that 70,000 square metres are needed to accommodate every additional $1 billion in sales, CBRE predicts that an additional 1,800,000 square metres will be necessary to support the industry in an already congested market.
“E-commerce has grown significantly in the past five years, and that continued adoption requires large amounts of logistics space,” CBRE’s Head of Industrial & Logistics Research Sass J-Baleh said.
“In the case of Australia, the forecast growth equates to needing an additional 1.8 million sqm of space, amid what’s already a chronic shortage of supply and a relatively-limited pipeline of new stock
“It’s set to fuel rental growth in over the coming years, as occupiers compete for supply, but more broadly there is a question of how to facilitate this growing requirement, including whether it’s possible to unlock alternative space or intensify the use of available space.”
Australian retail turnover rose 0.6 per cent in August 2022, according to Retail Trade figures released by the Australian Bureau of Statistics, much of which being driven by food related industries
The August increase was the eighth consecutive rise and follows a 1.3 per cent rise in July 2022, and a 0.2 per cent rise in June 2022.
Other retailing fell for the first time following five consecutive monthly rises, down 2.5 per cent, and is the largest fall in other retailing this year. Clothing, footwear and personal accessory retailing also recorded its largest fall this year, down 2.3 per cent in August following two consecutive rises.
CBRE’s Global E-Commerce Drivers Index measures six drivers for e-commerce penetration; share of urban population, mobile internet sales ratio, debit and credit card use, digital skills of the population, the presence of a dominant e-commerce player, and the percentage of population with a fixed broadband connection.
Australia ranks 14th out of the 31 nations evaluated with a score of 37 out of 100, scoring poorly on mobile internet sales and the existence of a major e-commerce business.
With a score of 83, mainland China is far ahead of the United Kingdom, which came in second with a score of 69. Australia is one of 13 countries with a score between 30 and 50.
Australia’s sector is less developed and is poised for sustained expansion, despite indications that e-commerce adoption is weakening in certain nations and even declining in the UK.
With sales predicted to reach $17 billion in FY2027, nearly twice the amount predicted for FY2022, the online grocery industry is expected to be one of the greatest drivers over the following years.
“Markets with more of the fundamentals in place experienced higher peaks during the pandemic, only for the rate to drop after restrictions eased, whereas Australia’s growth has been sustained,” Ms J-Baleh added.
“Online grocery shopping is an example of changing consumer behaviour, and it accounted for 20 per cent of Australia’s total online retail spend in 2021.
“However, that’s still only 3 per cent of the total grocery spend in the country, highlighting that there’s still significant scope for growth.”