Over the past two years, we’ve seen COVID create pandemonium across the globe. It’s impacted our lives in just about every aspect, largely in a negative way, but often with silver linings. This has been especially true for the industrial sector.

As governments around the world enforced lockdowns to prevent the spread of the virus, people retreated to their homes and the online shopping boom went into overdrive.

According to Australia Post’s Inside Australian Online Shopping report, eCommerce reached an all-time high in 2020, as the pandemic changed consumer behaviour and drove phenomenal growth in online shopping.

The corresponding 2021 Australia Post report revealed a 57 per cent year-on-year growth in online purchases, and that 82 per cent of households were now shopping online.

Re-Leased’s Australian rent collection data from this period depicts a similar story.

After an unprecedented 2020, rent collection in 2021 continued to experience the turbulence caused by the pandemic. However, over the course of 2021, rent collection made a strong recovery to almost pre-pandemic levels.

As expected, retail rent collection was severely affected by the ongoing lockdowns across Australia. Retail rent collection fell to a year low of 75 per cent in October, after experiencing the full effects of lockdowns and retailers closed their doors to the public for an extended period.

However, over 2021, industrial properties saw a strong recovery as Australia’s reliance on e- commerce increased, with rent collection reaching a high of 87 per cent. While industrial property was affected by the lockdowns, the stability of this asset class has proven valuable for landlords as they have maintained greater cash flows despite the trying conditions.

From these statistics, it’s easy to understand the demand for industrial property has gone to unprecedented levels.

However, as we increasingly learn to live with the pandemic and its effects become less interruptive in countries like Australia, what will happen as we come out of COVID?

Will online shopping regress to pre-pandemic levels, or simply maintain its pre-pandemic growth? Moreover, what impact will be seen on-demand for industrial property?

It’s fair to assume we’ll certainly see it maintain its pre-pandemic growth levels, and now that consumers have become comfortable with the online shopping process and formed those habits, it’s also reasonable to believe online shopping will continue to grow at an even faster rate than before the pandemic.

So, given this change in consumer habits, it’s highly likely the demand for industrial property will continue.

Tenants will seek better and faster automation and continue to seek out prime locations with access to roads and ports in order to solve the last-mile logistics problem, and landlords will need to continue to build and develop properties that meet this demand.

As businesses invest heavily in sustainable features, automation and fit-outs designed to meet particular operations, lease terms are increasing.

Prior to the pandemic, the industry would typically see a business sign a three or five-year lease, but as tenants invest in automation and other capital items on the premises, we expect to see tenants signing longer and longer lease terms.

Therefore, it is imperative for landlords to actively ensure properties meet the ever-changing needs of tenants in the industrial space as the e-commerce boom promises to go from strength to strength.

What does this mean for the relationship between landlords and tenants?

Given the pre-pandemic growth of online shopping, coupled with exponential growth of online shopping since the start of COVID as consumers have become more comfortable and habitual with online shopping habits, the future remains incredibly bright for landlords. Tenants are aiming for A- Grade industrial properties with automation and access to key transport links to address this online boom, meaning this upcoming year will continue the industrial sector’s significant growth.