There is no doubt that the growth of the e-commerce sector in Australia will ultimately translate to an increasing volume of physical goods circulating – through major transport gateways (e.g. ports and intermodal
terminals), warehouses, and on roads.
Ultimately this translates to a greater industrial footprint required, particularly within the Transport, Logistics, Retail,and Wholesale Trade sectors.
Recently, there has been a focus on the domestic consumers’ demand effects on the supply chain network; particularly since Australia’s projected population growth rate over the next five years ranks amongst the world’s
It is important to acknowledge Australia at a global context. Understanding the import and export demand forces ultimately provides us with an overall picture of the major industry sector influences (in terms of physical goods throughput) on industrial floorspace and building type requirements.
Ultimately, industrial property is effected by goods throughput and not solely on output.
For example, a persistent demand increase for Australia’s manufactured food products from major trading partners may lead to a production expansion in this sector, in turn, spilling over to floorspace expansion (increased capacity requirements) from the following in the medium to long run such
1) as cold storage warehouse and associated freight service facilities
2) Entrants in food manufacturing / logistics and
transport services (as the potential profit pool in this industry expands).
The Link between Urbanisation and Food Consumption Patterns
In our previous Pulse Paper, ‘Logistics – an Institutional Grade Sector’, we highlighted the growing importance of the Food and Grocery industry for Australia’s industrial property requirements as the share of Australia’s non-discretionary retail spend has grown over recent years.
In terms of Australia’s exports in Food Products, as shown in the below chart, this has increased significantly particularly owing to China’s rising consumer demand.
As the major developing economies of the world become more urban, the requirements from these countries’ consumers begins to change – and in particular is the demand for food, which is increasingly being met by trade.
Although the increase in Australia’s trade activity by value may not necessarily influence industrial property (as higher value lower cubic capacity physical goods require less storage space), trade expansion by volume is a more accurate measure when determining industrial floorspace requirements- and this is reflected in the greater movements of container trade flows.
Historically, port container movements across all of Australia’s major ports have recorded an upward trend.
Currently twenty foot equivalent units (TEUs) over the 12 months to October 2018 equate to 8.2 million across the major ports of Melbourne, Sydney, Brisbane, Adelaide, and Perth.
Historically, there has been somewhat of a correlation between the rate of growth of TEU movements and take-up of industrial floorspace – although this is lagged.
When the rate of growth in TEUs begin to rise we observe an increase in the take-up rate to subsequently follow suit.
Sydney, Melbourne, Brisbane TEU vs. Gross take up annual growth rates
TEU activity is projected to continue rising in Sydney, particularly as capacity constrains at Port Botany are anticipated to be alleviated through the infrastructure development of Moorebank Intermodal Terminal (with capacity to handle 1.1 million TEIJs per annum) as well as new developments at Enfield Intermodal Terminal (with expected capacity to
service approximately 25% of the total intermodal demand).
The IMF forecast Australia’s rate of growth in the volume of import and export of goods to 2023 will increase relative to historical trends, with the average annual rate of growth in imports forecasted at 5.5% and exports at 5.9% between 2018 and 2023. This projection is stronger than many of Australia’s major trading partners.