Commercial Real Estate, Logistics News, Supply Chain News

Rising commercial rent costs helping save money in supply chain?

Commercial and warehouse rent have skyrocketed since the turn of the decade, but international real estate giants Cushman & Wakefield say it could be helping save companies money further down the supply chain

A recent report from international real estate company Cushman & Wakefield states while demand for warehouse space has been off-peak in the first half of 2024, it is expected to grow across the remainder of this year and into 2025.

With Australian commercial rents already up nationally by roughly 70 per cent since 2020, Cushman is forecasting a 25 per cent growth in some precincts as companies look to reduce larger costs like transport to generate savings in their supply chain.

Sydney’s central west region and Brisbane’s trade coast are expected to lead the nation’s growth in this area, with the areas holding growth estimations of 29 per cent and 27.8 per cent respectively.

Despite that ease in rental growth across the first half of this year, Cushman expects rents to grow past historical benchmarks and rise by six per cent in 2024 and five per cent in 2025.

A gross take-up of 3-3.2 million square metres is anticipated in total for 2024, before that rises to 3.5-3.7 million square metres in 2025.

Cushman & Wakefield NAZ National Director, Head of Brokerage Logistics and Industrial David Hall says the normalisation of elevated rents have tenants looking for new ways to cut costs in their supply chains.

“Occupiers are becoming more focused on strategies to mitigate costs, including automation and technology to streamline operations and servicing from other city and regional facilities if feasible,” Hall says.

“For well-capitalised occupiers, asset acquisitions to stabilise long-term cost structures is another option gaining momentum.”

Head of Logistics and Industrial Research, Australia, Luke Crawford says the rental lens cast on the industry by this report is most applicable to those who operate in the B2C space.

“When an occupier assesses optimal customer fulfilment locations, in most cases, access to population outweighs higher rents given the cost savings it can provide in other parts of the supply chain,” Crawford says.

“While looking at rents through this lens won’t be as relevant for occupiers that don’t deliver business to customer, we estimate upwards of 50 per cent of the demand pool delivers B2C.”

Cushman & Wakefield is a leading global commercial real estate firms that employs roughly 52,000 people in 400 offices across 60 countries.

It reported revenue of $10.1 billion in 2022 across its core services.

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