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Food and grocery to drive demand for industrial space

Food and grocery distribution is set to be a major driver of demand for industrial real estate, as manufacturing becomes increasingly dominated by transports and logistics, according to a new report from JLL Research.

‘The Strength of the Manufacturing Sector’ report from JLL found that with Australian consumers spending more in the food category, this has implications for the industrial property market. Food retailing currently totals around AUD 133 billion in Australia, according to JLL.

“The food and grocery sector is expected to be one of the major drivers of demand for industrial space and this is not only in the form of transport distribution, logistics and cold storage space, but also with respect to space for food development and manufacturing,” JLL director, Industrial Research – Australia Sass J-Baleh said.

The report found that Transport, Postal & Warehousing and Retail Trade accounted for nearly 60 per cent of the total take-up of industrial floorspace in Australia in 2018, while Manufacturing accounted for 22 per cent.

“What is key here is that the Australian manufacturing sector is larger and more diverse than assumed. The industry is evolving and becoming more advanced.”

Food Product Manufacturing has exhibited the strongest employment growth over the past three years at 5 per cent, relative to all other manufacturing sub-sectors.

“The resilience of the sector is mainly owing to the relatively inelastic demand for food products, where consumers still require food in an economic downturn,” said J-Baleh.

JLL’s head of Capital Markets Industrial & Logistics – Australia, Tony Iuliano said that major manufacturing facilities serving the food industry are relatively resilient – serving both the local and global market.

“There has been significant capital investment into cold storage, which is a growing sector that ultimately services the population.

“Investment capital flows for the industrial sector will continue to drive yields to levels never seen before in this country,” Iuliano said.

The JLL Report found that manufactured products represent around 34 per cent of Australia’s total merchandised goods that are exported and the value share of food product manufacturing has been increasing over the past decade.

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