3PL Market Roundup – Q1 2024

Welcome to uTenant’s 3PL Market Roundup report for Q1 2024. As we noted in our last report, 3PL Market Roundup - The methodology behind the numbers, we will now be publishing the 3PL Market Roundup on a quarterly basis.

uTenant’s 3PL Market Roundup report looks at ambient pallet storage rates across Australia, providing valuable insights for businesses seeking third party logistics (3PL) warehousing solutions. We leverage our internal data to present median storage rates for each State, to give you an indication of the current 3PL market landscape. Furthermore, we'll explore relevant Q1 2024 market conditions that may have influenced these rates.

Two women looking at a laptop discussing warehouse rates. They are sitting at a desk within a warehouse.

Macroeconomic conditions in Q1 2024

Australian macroeconomic conditions in Q1 2024 were characterised by rising inflation, ongoing new warehouse space demand, and gradual improvement but ongoing disruptions in the supply chain. These factors significantly impacted the 3PL storage rates and the broader logistics sector.

Over the twelve months to the December 2023 quarter, the Consumer Price Index (CPI) rose 4.1%. The latest ABS data (27 March 2024) indicated a national CPI increase of 3.4% in the 12 months to February.

Rising inflation exerted upward pressure on storage rates. 3PL providers likely experienced increased operational costs, potentially leading to adjustments in storage rates to maintain profitability. Businesses seeking warehousing solutions in Q1 2024 may have encountered higher rates than in previous quarters.

In the recent Australian Logistics and Industrial Market Overview Q4 2023 report by JLL, despite an increase in industrial property supply, Q4 2023 saw average market rents continue to trend upwards across Australia, increasing by 3.9% to A$186 per sqm p.a. The supply / demand mismatch and the ongoing challenges for businesses seeking modern, efficient warehouse space is still placing upwards pressure on operating costs, which will likely translate to higher storage rates.

Warehouse capacity remains available across Australia, however, in major cities like Sydney, Melbourne and Brisbane demand remains high. Normally, this competitive landscape can put upward pressure on storage rates, especially for prime locations with desirable features; however, softer consumer spending and lower inventory holdings in recent months is creating competition between 3PL providers, as they seek out businesses to fill available capacity in their warehouses. This has led to stable storage rates around the country for the second quarter in a row.

The ongoing, but gradually improving, supply chain disruptions presented challenges for the logistics sector in Q1. These disruptions may have caused fluctuations in storage rates as providers navigated volatile costs and adjusted operations to maintain service levels.

Storage rates around the country

The data presented in this report is based on uTenant's internal data gathered through our PalletMatch service (undertaken with our network of 3PL providers and customers), and may not be fully representative of the entire Australian 3PL market. Rates can vary widely based on factors such as location, warehouse size, services provided, duration of storage, and the specific business industries we're working with.

Map of Australia with National Median Storage Rates (per pallet, per week) noted on each State. QLD=$510; NSW=$4.70; VIC=$4.50; SA=$4.70; WA=$4.70

The National median storage rate for Q1 2024 is $4.53 pppw1.

The 3PL landscape

Businesses are increasingly turning to 3PL providers for warehousing and logistics solutions. This increasing demand for warehousing space, particularly in major cities, is likely to persist in Q2 2024. Whilst we are seeing ambient warehouse storage capacity available in the market, specialised 3PL storage is still hard to come by (e.g. temperature controlled). Finding suitable warehouse space could be challenging, especially for businesses with specific location or feature requirements.

Rising inflation (as indicated by the CPI) is likely to continue impacting storage costs. Businesses may experience potential price increases as 3PL providers might adjust rates to reflect rising operational costs. Factoring in potential inflation-driven hikes is crucial when budgeting for warehousing expenses in Q2.

While ongoing disruptions might still cause some volatility, the situation appears to be stabilising. With a more stable supply chain, storage rate fluctuations might become less frequent compared to the past year. As core logistics stabilise, 3PL providers might shift focus towards offering value-added services to differentiate themselves.

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Additional 3PL landscape considerations

Beyond the headline rates, several other factors can influence the final cost of ambient pallet storage and should be taken into consideration:

> Warehouse features: Warehouses with advanced features like state-of-the-art security systems, temperature control, automation, or environmental sustainability credentials will naturally command higher rates compared to basic storage facilities.

> Contract terms: The length and structure of your contract with a 3PL provider can significantly impact the final cost per pallet. Negotiating longer contracts or committing to minimum storage volumes may lead to lower per-unit rates.

> Location: As mentioned earlier, prime locations in major cities will typically have higher storage rates than regional areas. Businesses should consider their specific needs and distribution requirements when determining the optimal warehouse location.

Recommendations for businesses

> With potentially limited availability, secure warehouse space well in advance, especially if you have specific location or feature requirements.

> Explore negotiating longer contracts or committing to minimum storage volumes to potentially secure lower per-unit rates.

> If location isn't a critical factor, explore warehouses in secondary markets to potentially find better deals.

By staying informed and being proactive, businesses can better navigate the dynamic 3PL landscape in Q2. With the support of uTenant, businesses can benchmark and secure the best warehousing solutions for their needs.

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Overall, the Q1 2024 market landscape presented a dynamic environment for Australian logistics. The 3PL landscape in Q2 is likely to see a continuation of trends from Q1, with potentially tighter space availability in major cities and upward pressure on storage rates due to inflation, potentially leading to slight price hikes for pallet storage. Businesses should factor in potential inflation-driven cost increases when budgeting for warehousing expenses.

In the longer-term, there might be a gradual normalisation of supply chain disruptions, leading to more stable pricing and a potential shift in focus towards value-added services by 3PL providers.

It's important to note that the pallet storage figures in this report are based on uTenant’s network of 3PL providers and will change over time. To get accurate and current pricing information, we recommend contacting us directly to discuss your specific 3PL and warehouse storage needs.

uTenant PalletMatch Team

uTenant’s team of experts have extensive knowledge of and experience in supply chain and logistics operations. With its vast 3PL provider network, uTenant is able to match clients with warehouse space specific to their current or growing needs. To put it simply, uTenant's purpose-built PalletMatch platform matches those looking for warehouse space, with those who have it – across Australia and New Zealand. Find out more about PalletMatch and how it can help you.

If you have warehouse space to fill, get in touch with the uTenant team now.

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1Benchmarked on per pallet per week (pppw) or part thereof.

Published: 8 April 2024