Industrial property is well placed to ride out the short-term uncertainty which has been caused as a result of COVID-19, according to Colliers.
The latest Colliers radar paper ‘COVID-19 Industrial Implications’ maintains that the recent growth in demand for transport and logistics as well as the key role industrial property plays in keeping the basic day to day necessities of Australians in supply, are key factors which will see the sector through the months ahead.
“Notwithstanding the short-term impacts, fundamentals within the Australian industrial and logistics market remain favourable with several structural and cyclical changes playing into the hands of the sector,” said Malcom Tyson, Managing Director, Industrial at Colliers.
“Bringing it back to basics, the key drivers of the industrial market in recent years have been population growth, infrastructure investment, growth in e-commerce and low cost of debt.”
“Although population growth is expected to take a hit over the short term, as net overseas migration drops significantly off the back of travel restrictions and the closure of the Australian borders to non-citizens, the outlook for the other key drivers in the current environment remains unchanged.”
Colliers' paper notes that the e-commerce sector in particular, continues to expand structurally, and the coronavirus outbreak is expected to result in a pick-up in online retail sales and subsequent demand for industrial space.
“With stores adjusting their hours and political leaders asking the public to stay home, the value of e-commerce has increased exponentially,” said Luke Crawford, Associate Director, Research at Colliers.
“Demand for large distribution and warehouse facilities is expected to continue its strong run over the past few years, particularly for last-mile locations; food companies, logistics companies, warehousing and to some extent manufacturing have shown how important they are in times of “social distancing” and keeping the supply chain open.”
“The panic buying of consumer staples during uncertain times like these has put food manufacturers and suppliers in the position of making sure their network of distribution and warehousing facilities are adequate to handle these types of demand spikes on a regional basis.”
It is expected that some companies may need to expand their industrial footprint in metro areas to keep up with the increased demand.
Highlighting this was the announcement in late March that Coles will open three ‘pop-up’ distribution centres in New South Wales, Victoria and Queensland to cater towards the rapid growth in food and grocery purchases.