MHD PROPERTY FOCUS
COVID-19 TO DRIVE E-COMMERCE STRUCTURAL SHIFT The latest research from Colliers International suggests that the move to e-commerce will be a key shift in the market. Luke Crawford, Associate Director of Research at the company outlines what you need to know.
Unlike the GFC where rents contracted between 9 per cent and 25 per cent in the prime market and 15 per cent and 25 per cent in the secondary market depending on location and yields increased to 8.5 per cent for prime and 9.5 per cent for secondary along the East Coast, industrial and logistics property is expected to perform well in the current economic environment. This outlook is underpinned by the structural and likely permanent shift towards online retail sales and recent growth in demand for transport and logistics. Notwithstanding this, there are going to be tenant casualties who are unable to trade through this period and there are going to be others who experience a significant pick-up in business revenue. While enquiry levels remain healthy in most markets, tenant demand has shifted towards defensive occupiers including food and beverage retailers, e-commerce groups (including fast moving consumer goods), transport and logistics providers, data centres and cold storage occupiers. Alternatively, 58 | MHD JUNE 2020
discretionary based occupiers and those reliant on goods from offshore markets will struggle in the current environment and will continue to do so over the foreseeable future. For these groups, those who were previously in the market for new or expansionary space have since placed these decisions on hold as they determine the impacts of COVID-19 on their business. The COVID-19 outbreak has the potential to revive Australia’s manufacturing capabilities and reduce our reliance on global supply chains as more goods are made locally. The early signs of this are starting to emerge in food and pharmaceutical manufacturing industries and will assist the logistics sector through both increased domestic and offshore consumption.
While certain locations may see a fall in rents and a rise in incentives, we do not expect it to be to the same extent as we saw in the GFC. Likewise, we do not expect yields to blow out by 150 basis points as they did in the GFC. While there may be some softening of yields for secondary assets as risk becomes priced in, core assets with strong businesses within will remain highly sought after by both domestic and global capital and yields will remain firm. Tenant covenants will be increasingly scrutinised going forward and length of WALE will never be more important as the flight to quality thematic plays out. The fundamentals for industrial and logistics property remain sound over the long term and as a result the sector Image credit: Emagnetic / Shutterstock. com
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he outbreak of COVID-19 has had a significant impact on financial markets globally. As a result, global economic growth will contract over the short term and many are now starting to draw comparisons with the GFC in 2008 with regards to both occupier and investment markets. The reality is, it remains too early to draw any major conclusions and comparisons to the GFC as the situation is still unfolding. However, recent data highlights that the ‘curve is flattening’ which remains positive for the Australian economy over the short term when compared to other countries such as the US and UK.
Many Australian retailers have redeployed their staff to online fulfilment to meet the increase in demands.
