- The Australian logistics sector is one of the most attractive real estate sectors globally, anchored by demand tailwinds, and some of the tightest supply conditions in any developed market. In our view, the Sydney logistics market offers one of the most compelling investment opportunities today in Australia, to benefit from both income growth and defensiveness in the years ahead.
- Logistics demand fundamentals in Australia remain robust. The country’s population growth ranks among the highest in developed markets, while e-commerce penetration is still early in its growth cycle – creating long-term tailwinds for ongoing logistics demand. Yet, supply constraints continue to persist. The nationwide logistics development pipeline stands at just 2-3% of total stock today.
- Within logistics, we view urban logistics as the most attractive investment opportunity, driven by proximity to population catchments, limited land availability, and located within proximity to key infrastructure. As e-commerce continues to expand, we expect strong urban logistics demand from retail platforms who seek to meet consumer demand for fast and efficient delivery.
- Over the past decade, only ~16% of new supply in Sydney was delivered in urban locations. Planning restrictions and high construction cost inflation have significantly raised the delivery hurdle for new logistics stock. Urban industrial land is also shrinking due to ongoing rezoning pressure from residential demand.
- This supply-demand imbalance has underpinned robust rental growth. Prime logistics rents in Sydney have climbed at an annualised 7.2% over the last decade – around 170 bps above Melbourne – but still lags global peers, suggesting further headroom for growth.
- With the RBA’s second cash rate cut to 3.85% in May and further easing expected, it sets the stage for logistics yields to fall. Logistics real estate is in a strong position to offer attractive risk-adjusted returns for investors.
To request the full report, please reach out to us at LP@laml.com.
