The GPT Group (GPT) has today released its research paper, Freight Expectations: Assessing the recalibration in logistics.
After undersupply and record-low vacancies in 2020-2023, the logistics market has stabilised with supply now aligned to demand, with the recovery being driven by goods consumption, and supported by population growth and rising e-commerce, according to GPT's Head of Research, Andrew Quillfeldt.
"The logistics sector is experiencing a recalibration. Supply continues to be demand-led, driving a more balanced market dynamic that supports attractive investment returns," Quillfeldt said.
As legacy land banks are developed out, new developments will face significantly higher costs. GPT estimates economic rents for new Sydney developments are 23% above existing market rents.
Development activity has been slowing from the 2023 peak, with developers taking a more measured approach requiring greater pre-leasing before commencing projects.
"We see the wide economic rent gap supporting strong prospects for rental growth as vacancy levels stabilise and start to contract," Quillfeldt said.
GPT's five-year outlook suggests underlying tenant demand of 14.6 million sqm across East Coast markets, driven by goods consumption, population growth and e-commerce, while acknowledging space efficiencies can be created through density and automation.
GPT's Head of Logistics, Chris Davis, who manages the group’s $4.7b portfolio, said the logistics market has reset and is poised for recovery.
"Occupiers today are focused on gaining efficiency through consolidation and automation offered by modern facilities. Demand for larger facilities, of over 30,000 sqm, has grown fastest, reflecting this operational shift."
The report also notes that a combination of constrained supply, rising construction costs, and solid demand fundamentals creates a favourable environment for rental growth in existing assets.
“Higher land and construction costs mean developers and owners are being more selective on timing of delivery, while longer development programs support rental growth,” Davis said.
The report notes that investment appetite in Sydney remains high with tightening cap rates. Melbourne has faced headwinds from taxes and softer demand but notes it as an attractive location for occupiers given the relative affordability of rental costs, high population growth and low supply pipeline.
“Given the recalibration the market has experienced, and the potential for vacancy to contract over the next few years, the sector is well positioned to achieve attractive returns,” added Davis.
View the full research report here.
ENDS
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Nat Burcul
Head of External Communications, The GPT Group
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