Knight Frank Australia released today a leading report on Urban Logistics in Australia - a prominent sector given the acceleration of the e-commerce sector post-COVID and the accompanying necessity for further innovation and resilience in supply chains and distribution solutions.

The report shows that the current shift in logistics trends linked to the pandemic is generating new demand for compact or micro fulfillment centres (MFC), and that grocery retailers are driving the development of MFCs with the need for speed-to-market to create new demand in the urban fringes from pharma, health and manufacturing.

Key points from the report are below:

• Demand for urban logistics facilities are led by the grocery giants.
• More than 2 million sqm of new industrial development was completed in Australia’s east coast markets last year, up from 1.4 million sqm in 2019, and 2021 is expected to reach a new tipping point with more than 2.2 million sqm of new industrial supply.
• The pipeline of urban logistics facilities due to be completed on the eastern seaboard in 2021 has doubled from 2020, with 26% of new supply from e-commerce fulfillment demand, up from 13% in 2020.
• Melbourne is the hero location for industrial and logistics development:
  • Almost half of the new projects due to be completed this year are in Melbourne, led by retail and logistics operator pre-commitment demand in 2020
    • In the Melbourne market, the growth in new facilities related to e-commerce/fulfilment demand is remarkable – growing from around 80,000 sqm in 2019 to almost 300,000 sqm in 2021.
    • Similarly, demand for logistics and distribution centre space will see the volume of new supply in Melbourne in that segment grow from below 50,000sqm in 2019 to above 350,000 sqm in 2020 and around 240,000 sqm in 2021 – growing by almost 5 times from 2019 to 2021.
• Looking to the future, it’s likely that we will see increased rates of existing infill sites being re-purposed for last-mile use.
  • Retail, parking spaces and light industrial to logistics conversions have been taking place across Europe and the UK, foreshadowing similar opportunities for Australian markets.
  • In one recent example, the City of London leased 39 car parking spaces to Amazon for a last-mile logistics hub that will use e-cargo bikes for delivery.
• The report’s predictions for where last-mile logistics sites are likely to pop up:
  • Areas undergoing gentrification with land being rezoned from industrial to high density residential and mixed use will stimulate interest in redevelopment opportunities to develop last mile facilities under the current zoning.
  • We could see such areas in Sydney include Alexandria/ Marrickville in the South and Auburn/ Lidcombe/ Homebush/ Silverwater in the Inner West.
  • Sydney could also see growth in the Strathfield area, which just borders on the Inner West, as it is home to Enfield Intermodal.
  • In Melbourne, emerging areas include Tullamarine in the North and Oakleigh/ Moorabbin/ Burwood in the South East and the Port of Melbourne.
  • In Brisbane, expect to see growth areas emerge North of the River in an arc covering areas like Pinkenba/ Eagle Farm/ Hendra/ Northgate. While in the South, Salisbury/ Rocklea/ Oxley could be targets. Inner city small hubs are also possible in semi industrial pockets around Bowen.

Katy Dean, Associate Director Research, Knight Frank Australia says, “As businesses expand their e-commerce capabilities, their warehouse and logistics requirements are growing and evolving, creating a huge opportunity for the industrial sector as a provider of real estate. In fact, the surge in e-commerca/retail, transport, logistics and manufacturing demand during the pandemic pushed new development completions to a historic 13-year high in 2020."

"The growth in e-commerce is intensifying the competition for industrial and logistics space, triggering an increased demand for specialised warehouse solutions, including automation. Responding to this demand, developers have been quick to scale up in response to recent growth trends, with a significant amount of new industrial development underway, particularly in Melbourne” according to Katy Dean. 

Click here to view and download the report.

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