Online Retail

The growth in online retailing as a percentage of total retail spending has had a significant impact on both the retail and industrial sectors in recent years. Retailers and retail landlords have needed to adapt to this structural change and further strategic planning will be required to drive their relative success in the years to come. On the other side of the equation, this structural shift is creating demand from transport companies servicing online purchases from both domestic and off-shore retailers. Even the “leakage” of retail spending overseas which Australian retailers are currently rallying against, will actually be a positive influence for industrial/logistics courier operators.

The retail and logistics sectors have been the major drivers of demand in the industrial market over the past 12-18 months. Major retailers such as K-Mart, Coles, Woolworths  and Metcash and logistics operators such as DHL, Toll, Linfox and QLS have leased or pre-committed to major industrial facilities on the eastern seaboard.

The strong $AUD will continue to make imports attractive, fuelling demand for distribution centres and warehouses. Internet retail sales have been rising rapidly in Australia, recording growth of 23% over the year to September, but still only account for 5.5% of the traditional retail sector, (compared with the UK which is over 8.0%). As online retailing in Australia continues to mature, some economists expect this market share as a proportion of total retail sales to reach 10% within the next 5 years. Another interesting trend that could emerge in Australia is what is referred to in Britain as “dark stores” which are essentially superstores exclusively to service online orders and have no physical customers. Shopping giant Tesco and Asda have a number of these superstores in the UK. In Australia, most retailers still service orders from existing stores, but in time there may be a trend towards large big box sites that only cater for online shopping orders.

Opportunities will arise in Australia for industrial landlords/developers over the next few years to capture this shift to online retailing, even if the $AUD does revert back to mean over this period. The share of online spend as a percentage of total retailing will continue to increase, and not only do the retailers and retail landlords have to continue to adapt, but the industrial players can capture the demand that will come from transport and logistics groups, select large occupiers and of course the major retailers.