A review of 3PL pallet storage rates around Australia

Welcome to uTenant’s 3PL Market Roundup report for Q3 CY2024, 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.

We’ve seen more activity in the market this quarter for storage requirements, which reflects an overall increase in consumer spending and demand. The market has started to rebound from the extremely slow first half of the year, but there is still plenty of available storage space with 3PL providers. We would normally see available space begin to tighten significantly at this time of year, in the lead up to peak season, but things are warming up slower than usual and it may not reach the peaks in demand we saw for the years following COVID-19.  

Macroeconomic conditions in Q3 2024

In the RBA’s last Statement on Monetary Policy (August 2024), it noted that inflation is still too high and is coming down slower than expected. Overall, businesses appear to be struggling to keep up with demand, operating close to their capacity. The cost to operate, combined with labour shortages, continues to put upward pressure on the supply chain, and we are seeing this start to play out in pallet storage rates in some regions.

In Australia, there is still more demand for goods and services than the economy can sustainably supply, which is the main cause for persistent inflation. Headline CPI increased by 1.0% in the June quarter to be 3.8% higher over the year, up from 3.6% in the March quarter.

Domestic demand was more resilient in early 2024 than the RBA previously forecast. Globally, rising consumer spending and the need to restock inventory increased demand for goods from China and East Asia. This is putting more pressure on global shipping, which is already facing delays due to the conflict in the Middle East, causing longer shipping times. As a result, the cost of shipping a container has jumped significantly since May 2024. While this hasn’t yet led to higher prices for goods globally, it could push inflation up if it continues, possibly affecting the price of goods in Australia too.

Though demand has proved resilient for Industrial Property in Australia, with strong supply, incentives are increasing from troughs recorded in 2023. Sublease opportunities for warehouse space is abundant and weighing on effective rental growth in some precincts, keeping rental rates relatively stable.

Storage rates around the country

The data presented in this report is based on uTenant's internal data set, gathered through our PalletMatch service (undertaken with our National network of 3PL providers and customers), and may not be fully representative of the entire Australian 3PL market. It’s important to note that, pallet storage 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 Q3 2024 is $4.35 pppw¹, up from $4.00 pppw¹ reported in Q2.

New South Wales (NSW), once again, had the greatest variation in storage rates with a low of $2.95pppw¹ and an equal high of $7.00pppw¹ with Western Australia. Queensland’s range of $2.95pppw¹ to $5.00pppw¹ remained relatively stable quarter-on-quarter, as did South Australia with $3.20pppw¹ to $5.00pppw¹. Victoria saw an increase on the top end, with a range of $2.80pppw¹ to $6.00pppw¹.

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

Import container volume growth was strong in early 2024 and has managed to hold up for the year, however, we are not seeing the further growth that we normally do in the lead up to year-end peak. On the upside, this will help balance out supply and demand in the market and discourage large incremental increase in pallet storage rates.

The recent global increases in shipping costs have elevated the risk of future supply chain disruptions, but for the most part, supply chains are largely operating as normal so far. Nonetheless, domestic labour and non-labour costs (including electricity, insurance, and warehousing and logistics rents) continue to place some upward pressure on 3PL storage rates in Q3.

We’ve seen strong growth in the number of requests for storage in Q3, with requests for 3PL warehousing services in Queensland and Western Australia leading the way. In fact, capacity in Queensland is becoming increasingly tighter as the year goes on.

NSW and Victoria have always seen higher demand than the other States, yet demand remained stable quarter-on-quarter, as shown in the minimal shift in the median storage rate for each State. Competition between 3PL providers, however, remains strong. This has driven some 3PL providers to cut their rates; yet those 3PL providers in prime locations with quality warehouse space have been able to charge a premium for their service. The difference between the lowest and highest pallet storage rates in NSW was $4.05 for the quarter, whilst in Victoria it was $3.20.

Victoria’s Western suburbs continue to hold an abundance of available warehouse space and 3PL providers to choose from. For those who are flexible with where they can store their inventory, this is your chance to potentially nab a good deal in the West.

Customers with niche storage requirements, like frozen or temperature control requirements, continue to battle with scarcity in available warehouse space. It’s becoming increasingly difficult to find available capacity, especially for larger requirements, and customers should expect to pay a premium rate. NSW in particular remains underserviced in respect to temp-controlled options.

In Q2 there was concern of potential shipping delays into Australian Ports with the threat of attacks on commercial ships and the risk of trade disruptions due to the escalation of geopolitical tensions. Pleasingly, this threat now seems low. A slower than expected year-end peak, combined with a lower risk of supply chain congestion, product owners will benefit from more storage capacity remaining available over the coming months.

It’s not necessarily bad news for 3PL providers, who were maybe banking on year-end peak to increase demand for their services. 3PL providers can take this opportunity to review and improve their operations and service, so they can better manage the ongoing labour shortage and increased cost to operate.

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.

• If you have a requirement in Victoria or New South Wales, capacity is still available and storage rates have remained relatively stable – now is a good time to review your upcoming requirements and secure warehouse space well in advance.

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 3PL storage rates than regional areas. Businesses should consider their specific needs and distribution requirements when determining the optimal warehouse location.

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 3PL storage rates or sharper rent if leasing your own warehouse.

Conclusion

Overall, the Q3 2024 logistics landscape was positive for businesses seeking warehouse storage, and also for 3PL providers. Potential shipping delays and congestion remain at bay, allowing supply chains to operate normally.

In Q3 we saw median storage rates increase in secondary regions (Queensland, Adelaide, and Western Australia) and remain stable in primary regions (New South Wales and Victoria). This generally reflected the demand in the market, but we have seen an increase in the number of requests for storage overall.

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.

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

Published: 22 October 2024