Industrial property occupiers look at strategic consolidation

Businesses across Australia are shifting from rapid warehouse expansion to strategic consolidation as they face rising real estate costs and normalising e-commerce demand in 2025.

Following unprecedented warehouse demand and rental growth during the pandemic, businesses are now prioritising efficiency and cost reduction within their existing industrial footprints rather than expanding to insulate against supply chain uncertainties according to JLL.

Nathan Bingham, head of logistics and industrial occupier services in Australia at JLL, has observed this shift in strategy among industrial occupiers.

"We have started to see businesses consolidating operations within their existing properties before expanding to new spaces, as well as re-evaluating where they store inventory, balancing leasing costs with connectivity to customers," Mr Bingham said.

In Australia, industrial supply reached 3.06 million square metres in 2024, which was 74.8% above the 10-year annual average. This significant increase has helped relieve the pent-up occupier demand that surged during the pandemic years.

Despite the move toward consolidation, national average prime net face rents in Australia increased year-on-year by 9.4% as businesses continued to seek warehouse space close to population clusters. However, these rental increases are now showing signs of easing.

Companies are achieving optimisation primarily through the modernisation of both property and operational strategies, with new warehouse developments enabling businesses to consolidate operations while improving productivity from smaller footprints.

Technology and automation investments are playing a crucial role in this transformation.

"New warehouse development allows companies to consolidate space and drive greater productivity from a smaller footprint, particularly when operations are supported by investment in technology and automation," Mr Bingham said.

Looking ahead, the industrial property market continues to evolve with e-commerce retailing in Australia recovering from 12.7% in 2023 to 13.7% in 2024. "This, coupled with the increasing focus on sustainability is likely to further drive the trend of strategic planning and consolidation in the coming years. It will pay to think ahead,” he said.