Logistics & Industrial Occupier Market Outlook 2024

Current Occupier Insights

Inventory Management For most occupiers, inventory management remains the number one concern . Inventory levels are still volatile for wholesalers and transport and logistics occupiers as their customers are uncertain of the stock levels and space requirements required over the next 12-24 months. A slowing retail trade environment and continued supply chain volatility underpins this uncertainty . As a result, occupiers are reluctant to give up space, even if it is surplus to their current needs, as they know demand can turn quickly . For this reason, lease renewal rates are anticipated to remain high until businesses have greater visibility on required stock levels over the short to medium term. Rents The pace of growth and current level of rents are becoming a concern for some occupiers; however, it varies by sector and city. Given most leases currently in place were struck three or more years ago, with capped market reviews at options, there has been a significant lag in rental growth for existing facilities . Many occupiers are unaware of the unprecedented growth recorded over the past three years. The impacts of higher rents are most pronounced for lower throughput occupiers who tend to have lower inbound and outbound logistics costs. However, rents in most cases still represent less than 10% of total supply chain costs .

Locational Shift Partly a reflection of cost, occupiers that can service Sydney from interstate or regional locations are actively looking to do so due to the lack of availability and uncertainty in delivery timeframes for new builds . However, this is not a trend we anticipate at scale, but rather select cases based on business need. Markets that are benefiting from this are Melbourne’s North and Brisbane. The business case for Melbourne’s North stems from the ability to service the Sydney market via a single truck driver shift. Alternatively, Brisbane is seeing examples of tenant migration from Sydney given the reduction in backload costs on the southern return leg.

Rent vs Own Select well-capitalised occupiers that have traditionally been tenants are starting to consider acquiring assets or land in order to control their long-term cost base and gain a competitive advantage. While this is not a trend we anticipate will become widespread, it highlights the shift in mindset from several major occupiers, particularly transport and logistics operators.

5 | CUSHMAN & WAKEFIELD | LOGISTICS & INDUSTRIAL

OCCUPIER MARKET 2024 OUTLOOK | 6