Property Australia

Gateway to growth

PROPERTY AUSTRALIA August 4, 2020

Growth plans at Australia’s busiest port send a confidence signal to the property industry, says Port of Melbourne’s CEO Brendan Bourke, as e-commerce also drives demand for industrial land.

 

  Three key takeaways:

  • Port of Melbourne expects trade volumes to grow by 3% year on year
  • Industrial land remains in high demand, even with the economic pressures of COVID-19
  • CBRE estimates that around 350,000 sqm of new industrial and logistics property will be required each year to meet demand.

 

Every day $1.2 billion of trade moves through Australian ports. As an island nation, ports are central to Australia’s supply chain and around 98 per cent of our trade passes through them.

050820 - Story 2 - Brendan BourkeAustralian ports handle more than eight million containers a year – five times more than they did two decades ago. Three million of those containers make their way through Australia’s largest container and general cargo port, Port of Melbourne.

Despite the ups and downs of 2020, Port of Melbourne expects trade volumes to grow by three per cent year on year, which would result in almost nine million containers (expressed in twenty-foot equivalent units or TEU) by 2050.

While COVID-19, drought and bushfires have influenced exports and trade volumes this year, Bourke says the impact has been moderate – around a five per cent reduction in volumes compared with last year.

There are also signs of resilience. In June the port welcomed the 299-metre long CMA CGA Ural, the largest vessel by capacity to ever call at the port. Another recent arrival, the Conti Courage, boasted the largest cargo exchange on a single vessel: some 7,800 TEU.

 

Investing for growth

Since the state government finalised the port lease transaction almost four years ago, Port of Melbourne has developed a 30-year port development strategy. This identifies 10 projects to meet the volume of trade and the size of vessels expected to call at the port.

“We are committed to investing in the Port to ensure it remains the premier port in Australia, a cornerstone of the Victorian economy, and to move goods in and out of the port to their destination more quickly,” Bourke says.

Despite managing around 500 hectares of land, the Port has limited scope to expand its footprint. Therefore, efficiency gains must come from best use of the assets, and from improving connectivity between the port, warehouses and distribution centres.

Bourke says the port is investing $125 million in rail infrastructure to support the rollout of the Port Rail Shuttle network and regional intermodal terminals. It is also working with the Victorian and federal governments to integrate its plans with state and national freight infrastructure projects, including the 1,700 kilometre Inland Rail project.

“The port’s rail solution is a critical and missing link in Melbourne’s transport and supply chain network,” Bourke explains.

“Everyone we talk to says rail is a good thing and industry has called for a rail solution for more than a decade.”

 

Perfect timing for property

Industrial and logistics property has demonstrated its role as mission critical infrastructure during the COVID-19 pandemic, says Christine Miller, CBRE’s head of supply chain for the Pacific.

050820 - Story 2 - Christine Miller CBRE“We’ve learnt that freight and logistics are essential services, and the cornerstone of an organisation’s operations, regardless of the products. So continued investment in port infrastructure is vital to our nation.”

Miller says CBRE research has found five years of online growth has occurred in the first half of 2020. “E-commerce has grown from 10 to 15 per cent of total retail sales – something we were weren’t scheduled to achieve until 2025,” she says.

Amazon’s plan to open a 200,000 sqm robotic fulfilment centre in Western Sydney is just one sign of the times. Online fulfilment requires three times the space as a standard bricks-and-mortar retail operation, Miller explains.

“We estimate there will be a need for an additional 350,000 sqm of new industrial and logistics property each year.

“Even before the pandemic, businesses were moving to dispense inventory from multiple warehouses to meet customer demand for shorter delivery times.”

Miller says COVID-19 has turned ‘just in time’ inventory practices into ‘just in case’. “We estimate increases in inventory holdings are likely to be between five and 10 per cent.

“All these trends will drive a steady demand for industrial and logistics assets in Australia. Melbourne will be a focal point for this growth as Australia’s import and export driven economy continues to grow.”

 

Looking to the long-term

The Property Council has been working collaboratively with the Victorian and federal government to increase the pipeline of industrial land around Melbourne, and has welcomed the recently-released final Melbourne industrial and commercial land use plan.

050820 - Story 2 - Cressida Wall“The land use plan is a vital document to help ensure the successful growth of Melbourne. The plan will provide certainty to businesses looking to grow and acquire new sites in coming years,” says the Property Council’s Victorian executive director Cressida Wall.

“Industrial land remains in high demand, even with the economic pressures of COVID-19. A strong industrial land supply pipeline is vital for Melbourne, and the utility of existing industrial land needs to be maximised.

“Our Infrastructure, Industrial and Logistics Committee is also currently coordinating a Property Council submission to the independent review of Victoria’s ports, and we will be using the opportunity to highlight the need for integrating vital infrastructure to strengthen and secure our local supply chains.”

While Melbourne’s second wave of virus outbreak is a setback, Brendan Bourke is looking long-term.

“It’s vital that we all stay focused on the bigger picture – delivering the right infrastructure and operating environment to drive efficiencies in the supply chain so that we can continue to play our role in the state’s economic future.”

Tags: INDUSTRIAL