E-commerce penetration in Australia has surged to being four years ahead of the pre-COVID trajectory despite some post-pandemic easing, as Australian consumers continue to ditch brick-and-mortar stores for online shopping, according to CBRE’s latest E-Commerce in the Post-Pandemic Era report.
E-commerce is now the new norm
“There are now more consumers buying online, with 82% of Australian households making an online purchase in 2022 versus 73% in 2018. These are now ‘sticky’ consumers, who did not previously purchase online but were forced to during the pandemic and have a continued preference for this style of shopping,” said CBRE’s Australian head of industrial and logistics research, Sass J-Baleh.
Australia’s retail trade spend (offline and online) and e-commerce penetration rate
CBRE’s research indicated that Australia’s e-commerce sector grew by 113% between 2017 and 2022, totalling $53 billion, with 12.8% of the country’s total retail spend comprising online sales as of September 2023
While online retail trade has been trending upward, its growth rate has fallen substantially from the record high of 15% in April 2022 during the peak of COVID-19 lockdowns to a three-year low of 12.6% in March 2023.
Nonetheless, that market has since normalised at rates higher than the annual average growth of 2.5% over 2017-2021.
“Above-trend e-commerce penetration rates have also been recorded in emerging e-commerce markets, such as Canada, Spain, Poland, Italy, Portugal and Turkey. However, we have also observed this in the US, where the e-commerce penetration rate is three years ahead of its pre-COVID trend,” J-Baleh said.
E-commerce penetration rate comparison, 2015-19 trend and actual (%)
The home and garden sector was at the forefront of online sales in 2022, boosted by a 21% bump in pet product sales, while food and liquor trailed in second place.
Although New South Wales consumers spent the most on online retail sales, Victoria had the highest e-commerce penetration rate of 15%.
Warehouses will be the hottest asset in the coming future
“Nationally, we expect that e-commerce penetration will continue to grow to a forecast share of 15% by 2027. In tandem, 1.1 million square metres (sqm) of additional e-commerce dedicated logistics space will be required in Australia over the next four years to support the growth of internet sales,” J-Baleh said.
Internet sales as a percentage of total retail sales, 2021 vs 2026F
“This will require us to unlock alternative space or to intensify the use of available space to meet demand, something that’s already occurring in the Sydney market with the development of multi-storey warehouses,” she said.
Securing warehouses strategically located to facilitate the seamless last-mile delivery of online orders will be a top priority for the industry.
“Fast delivery requires goods to be stored close to consumers in urban infill locations. However, warehouse space is becoming limited in urban areas, and land is becoming more expensive.”
Nathan Egan, CBRE South Sydney Managing Director
“One solution to limited space in urban areas will be the development of multi-storey warehouses to make use of the limited land available whilst also being more cost-effective,” Egan said.
Around 850,000 sqm of multi-storey floor space will come online between 2023 and 2027 across 20 projects in Sydney, which holds the highest rents nationwide. About 30% of this floor space has development approval or is under construction.
Competition for logistics space heats up
As e-commerce adoption utilises significant logistics space, Australia’s logistics vacancy rate is being overstrained.
Australia’s vacancy rate is the lowest globally at 0.8%, with demand far outstripping supply, causing rental growth to spiral. Super prime face rents have skyrocketed by 22% over the year to September 2023.
Floorspace take-up, Australia
Retail trade occupiers account for 22% of floorspace leased in Australia, and an estimated additional 1.1 million sqm of e-commerce dedicated logistics space is required to sustain online sales growth.
Article source: thepropertytribune.com.au