Rising real estate costs and tempered e-commerce demand are prompting companies to reassess their warehouse requirements.

Focus is shifting away from rapidly expanding their footprints to insulate against supply chain uncertainty and towards boosting efficiency, cutting costs and enhancing productivity.

After a period of unprecedented warehouse demand, turbocharged construction and rental growth, analysts are calling 2025 the year of strategic consolidation, with e-commerce penetration normalising and greater clarity over sustainability requirements.

“We have started to see businesses consolidating operations within their existing properties before expanding to new spaces, as well as re-evaluating where they store inventory, balancing leasing costs with connectivity to customers,” says Nathan Bingham, head of logistics and industrial occupier services in Australia, JLL. 

In Australia, industrial supply at 3.06 million square metres was 74.8% above the 10-year annual average in 2024, relieving pent-up occupier demand that surged during the pandemic, according to JLL's Australia National Industrial Market Dynamics report 2024.

National average prime net face rents increased year-on-year by 9.4% as businesses sought warehouse space close to population clusters, though they are now moderating slightly.

In New Zealand, businesses are struggling to find space, with land shortages hampering supply and driving up rents. Wellington’s industrial net absorption outpaced supply for a fourth consecutive year in 2024, supporting 2.8% annual rental growth, according to JLL’s New Zealand Market Dynamics Q4 2024 report. In Christchurch annual prime rents increased 13.8%.

“With recent rent stabilisation and increased incentives, there is now renewed confidence from many occupiers to proactively seek solutions in this new, higher cost environment,” Bingham says.

Their objective, Bingham adds, is to optimise their distribution networks. Companies are primarily achieving this by modernising both their property and operational strategies.

“New warehouse development allows companies to consolidate space and drive greater productivity from a smaller footprint, particularly when operations are supported by investment in technology and automation. The consolidation of operations can also create the opportunity to relocate operations geographically to reduce transport costs,” Bingham says.

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