Welcome to uTenant’s 3PL Market Roundup report for Q2 CY2024, which which looks at 3PL ambient pallet storage rates across Australia from July to September. This report provides valuable insights for businesses seeking third party logistics (3PL) warehousing solutions, whilst also allowing 3PL providers to benchmark their own rates. We leverage 3PL storage rate data from our Warehouse Storage & 3PL (PalletMatch) service to present median storage rates for each State, to give you an indication of the current 3PL market landscape.

Macroeconomic conditions in Q2 2024

Market escalation remains persistent as 2024 unfolds. The RBA’s inflation forecasts suggest that Consumer Price Index (CPI) is unlikely to drop below the 2-3% mark until the second half of 2025, reflecting uncertain economic outlook. The RBA also reported that household spending has been weaker and is likely to continue like this in the near term.

In Q1 CY2024, we reported that rising inflation exerted upward pressure on storage rates, as 3PL providers experienced increased operational costs, potentially leading to adjustments in storage rates to maintain profitability. Whilst cost pressures on 3PL providers remains, available capacity in warehouses has stabilised and even reduced storage rates in some regions, which we will discuss in more detail later in this report. In Q2, we saw storage rates drop in some regions down to around the $3.00 mark.

As for the Industrial Property market, supply is building, but well-located land parcels are becoming increasingly scarce, and most regions are still in supply deficit, according to the latest Australian Logistics and Industrial Market Overview Q1 2024 report by JLL. We will see the affects of this play out in the medium- to long-term.

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.

The National median storage rate for Q2 2024 is $4.00 pppw¹, down from $4.53 pppw¹ reported in Q1.

New South Wales had the greatest variation in storage rates, with a low of $3.60 pppw¹ and a high of $5.95 pppw¹. Victoria wasn't too far behind with a range of $2.80 to $5.00 pppw¹ , and in fact had the lowest recorded rate Nationally. South Australia (SA) and Western Australia (WA) both had a top range of $4.85 pppw¹ and a low of $2.90 pppw¹ and $3.00 pppw¹ respectively - this is typical of SA and WA, who tend to have similar pallet storage rates as many 3PL providers model the rates of these States collectively. Finally, Queensland had the least variation in range with a low of $3.35 pppw¹ and a high of $5.10 pppw¹.

Each quarter, uTenant's network of 3PL providers share their pallet storage rates with the PalletMatch team; enabling us to produce this insightful industry report for 3PL providers and product owners alike.

The 3PL landscape

We have seen a better supply of available warehouse space, particularly in Melbourne and Sydney, throughout Q2 as demand has slowed and spending decreased in a number of retail sectors. Many 3PL providers have space available and while some are looking to sublease unused white space, others are even consolidating to smaller footholds. Demand for prime locations remains high, but certainly there has been a notable slowdown in growth from Q1 to Q2, which is reflected in storage prices nationally.

As noted earlier, quality available warehouse space (Industrial Property) remains low. So, those 3PL providers who are in prime locations, notably the East Coast of Australia, will continue to see demand from businesses seeking 3PL services. In fact, this was evident during Q2, with storage rates at the higher end, along the East Coast, in the $5.00 range.

Whilst pandemic-related disruptions to supply chains have largely resolved, the risk of other supply shocks have increased. Most recently, the threat of attacks on commercial ships is forcing vessels to reroute, and there is now some of the worst congestion ever seen at the Port of Singapore. Additionally, if there were to be trade disruptions from an escalation of geopolitical tensions, global commodity prices could increase and disrupt the supply of goods further.

The potential delay of containers arriving into Australian Ports in the second half of the year, and the uncertainty of inventory arrival time, may see importers and businesses move away from a just-in-time inventory model and back to just-in-case; essentially storing more inventory onshore, in Australian warehouses, in the lead up to year end peak. This will once again cause available warehouse capacity to reduce and storage rates to increase.

3PL landscape insights

Recommendations for businesses

• 3PL providers should consider subleasing as a strategy. It’s possible to sublease your under-utilised warehouse space to another tenant, or if you’re in the market for another warehouse you might consider subleasing as an option to get potentially sharper rates.

• With capacity available and storage rates generally lower than Q1, now is a good time to review your upcoming requirements and secure warehouse space well in advance.

• 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. With the support of uTenant, businesses can benchmark and secure the best warehousing solutions for their needs, whether that be better storage rates or sharper rent if leasing your own warehouse.

Additional 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.

Conclusion

Overall, the Q2 2024 logistics landscape ended somewhat positive for businesses seeking warehouse storage, and somewhat negative for 3PL providers as they continue to compete for limited market share and work to manage increased operational costs. Should shipping issues and supply chain disruptions continue and increate, that could look to flip in Q3 and Q4.

In Q2 we saw storage rates reduce in most regions and 3PL providers shift their focus to value-added services and optimised operations to try gain an advantage over competitors. This short-lived reprieve for businesses seeking 3PL warehouse services will be over soon. In Q3, we are likely to see storage rates increase due to shipping delays and supply chain disruptions.

The 3PL Market Roundup Report is published on a quarterly basis, in the month following the end of the calendar quarter. See 3PL Market Roundup - The methodology behind the numbers, for a deeper explanation of the report and its purpose.

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.

If you are looking for warehouse space click the button below to start your search with uTenant.

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

Published: 25 July 2024