Australians just spent $21.9 billion online in a single quarter — up 14% on a year ago, according to Australia Post’s latest Quarterly eCommerce Update. That milestone has been widely read as a straightforward tailwind for logistics demand. It is. But the more interesting story sits on the other side of the ledger, where the supply response is quietly disappearing — and it raises a question the market isn't yet asking: is the next rental cycle closer than it looks?
The reflex take is that record online spending simply means more sheds. The reality is more nuanced. Consumers are spending more often but watching every dollar, average basket sizes fell to a record low $90 as households chase value and concentrate discretionary spend around sale events, AusPost's quarterly data shows. That behaviour is reshaping how goods move, not just how much. Faster delivery expectations, more returns and marketplace growth (up 17% year-on-year) all reward proximity and reliability over raw floorspace, and that plays directly into well-located, infill logistics stock.
This is also where the demand maths matters. Population growth is often cited as the primary driver of floorspace demand, and while some participants put the relationship as high as 4 sqm per person, the more grounded elasticity sits closer to 1.0–1.2x. While precise coefficients vary by market cycle, industry research suggests that e-commerce is a materially stronger lever. The pass through from online penetration to logistics demand runs at roughly 2.0–3.0x. In other words, each incremental shift to online generates two to three times the floorspace pull of underlying population growth alone, which is precisely why the Australia Post data isn't just a retail headline. It is one of the most direct, and most underappreciated, drivers of industrial demand we have.
Here is the counterintuitive turn. Just as demand proves resilient, the development pipeline is contracting sharply. Preliminary Savills Research shows national supply is expected to hold near cycle highs through 2026 before falling around 30% in 2027, roughly a third below the 2024 peak. The East Coast markets lead the pullback, down 27% year-on-year, with Western Australia and South Australia thinning further still. Higher construction costs, tighter feasibility and reduced speculative development activity have done what cyclical caution usually does: switched off the tap right before demand turns.
Importantly, the current vacancy story is being widely misread. East Coast vacancy has edged up to around 5% according to Savills and SA1 Property, but this is supply-led, not demand-led. It is the product of recent completions and backfill space being absorbed, rather than tenants retreating. Leasing volumes have begun to rebound, and availability above 20,000 sqm is already tightening in Sydney. This is a market working through the last of an elevated delivery cycle, not one losing occupier support.
Put the two trends together and the answer to our question sharpens. A demand base structurally geared to e-commerce at 2–3x elasticity, meeting a pipeline that shrinks by a third, is the textbook set-up for the next phase of the cycle. Tightening supply typically precedes rental growth, and with so little new stock scheduled beyond 2026, even a modest lift in occupier confidence could quickly revive competition for quality space.
So what does this mean?
For occupiers, today's conditions — reasonable choice, elevated incentives — are likely temporary. Those with 2027–28 requirements should be securing options now, particularly in supply-constrained infill markets where the pipeline is thinnest.
For capital, the window is more compelling than headline vacancy suggests. Pricing has largely reset, income is resilient, and the supply cliff creates a clear runway for rental recovery. The assets best placed are well-located, modern facilities with reversionary potential — precisely where a thinning pipeline converts demand into pricing power.
The e-commerce number will grab the headlines. But the sharper signal is what isn't being built — and why the next cycle may arrive sooner than the market expects.
The squeeze in numbers:
- $21.9bn spent online in June Qtr, +14% Y/Y — now 25% of all retail spend (Australia Post)
- $82.6bn spend online in 2025, +14 Y/Y
- E-commerce penetration to logistics demand elasticity is about 2.0–3.0x, vs population growth to floorspace at around 1.0–1.2x (Savills Research)
- National industrial supply set to fall ~30% in 2027 (Y/Y), ~33% below the 2024 peak (Savills Research and Oxford Economics)
- East coast pipeline down 27% Y/Y in 2027; vacancy = approx. 5% and supply-led, availability >20,000 sqm already tightening (Savills Research, SA1 Property)
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