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A $1.2tn sector: The ‘critical’ impact of Australia’s industrial property

By Juliet Helmke
21 February 2024 | 12 minute read
matthew kandelaars property council reb vbwygf

All eyes might be on residential construction, but it’s important Australia keeps track of its industrial real estate pipeline as well.

New research from the Property Council and Oxford Economics Australia has quantified the massive economic impact that real estate relating to industrial and logistics activities has on the economy, reporting that annually over $1.2 trillion worth of goods flow through Australia’s so-called “big sheds”.

Furthermore, 38 per cent of household consumption in FY2022 was from goods that passed through industrial assets like warehouses, manufacturing facilities and distribution centres, amounting to a total of $423 billion.

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According to the Property Council’s group executive for national policy and advocacy, Matthew Kandelaars, this is the first full quantification of the value of goods moving in and out of Australia’s industrial facilities.

“And the number – more than a trillion – is significant,” Mr Kandelaars said.

Armed with this data, the Property Council is hoping to impress on those involved in policymaking and incentivising construction just how critical it is to ensure that the growth of the sector keeps pace with the country’s needs.

“While they don’t always attract the same attention as other forms of real estate, industrial facilities are critical to not only moving goods into Australian homes, but they are also our gateway to the world, with more than half of the goods moving through our sheds being imported or prepared for export,” Mr Kandelaars noted.

As the country navigates its way through a cost-of-living crisis, he drew attention to the impact a dearth of industrial space could have on Australians’ budgets.

“Just like the residential market, where we know about the impact of tight vacancy rates on renters, the supply of warehouses is also drastically short, with vacancy rates in industrial sites sitting around 1 per cent across the country. And just like in housing, the lack of supply can have major negative flow-on effects on delivery times, logistics and of course cost.”

With such a high volume of household consumption dependent on industrial and logistics space, the flow-on effect could be massive if extreme shortages drastically increase competition – and therefore prices – for space.

“Considering how important these assets are to our economy, the status quo is not sustainable,” Mr Kandelaars opined.

The Property Council is asking Australian governments to take a lesson from the pandemic and ensure they are adequately protecting the efficiency of supply chains by ensuring that planning laws and zoning can support industrial development.

The body is in favour of an approach that would substantially change the face of the country’s current logistics sector: building up, rather than out.

Advocates have increasingly been encouraging the construction of multistorey warehouses in Australia as one way to mitigate the difficulties in placing new industrial assets.

“Finding suitable land for warehouse facilities is a tough task, with land and zoning constraints, delays in utility connections, inadequate public transport and infrastructure and encroachment on industrial corridors putting strain on the market,” Mr Kandelaars said, acknowledging the challenges.

But a failure to do so would leave the country – and Australians – in an economically precarious position.

“Meeting the needs of our growing population will require increased industrial assets. The important role these assets play in our economy cannot be understated,” he said.

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ABOUT THE AUTHOR


Juliet Helmke

Based in Sydney, Juliet Helmke has a broad range of reporting and editorial experience across the areas of business, technology, entertainment and the arts. She was formerly Senior Editor at The New York Observer.

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