Amazon’s entry into the Australian retail space has disrupted how businesses work – but the impacts on the commercial and industrial property could be significant.
The online giant has expanded its operations throughout Australia, including a recent lease of 24,000 square metres of industrial land in Melbourne. As Amazon’s Director of Australian Operations Robert Bruce told the Sydney Morning Herald, “this is just the start”. But the start of what exactly? The implications for both retail and industrial property are, to put it lightly, immense.
EMERGING THREATS FOR BRICKS AND MORTAR RETAIL
As Australians spend more of their time and money online, Amazon is poised to take a larger market share away from traditional retailers. That’s the finding of an m3 Property report from earlier this year, which identified the following
as markets where consumers were more likely to shop online:
- Electronic products
- Footwear and apparel
These are all product lines where there is consistency in product and a quality level which is known without visual inspection. There is even some interest among consumers in conducting their fruit and vegetables shopping online.
The convenience offered by giants like Amazon means that bricks-and-mortar retailers have to evolve with – or embrace – the internet revolution to remain competitive. Amazon allows businesses to sell their wares through Amazon Marketplace, which may be a streamlined way for businesses to complement their store with an online presence.
Additionally, retailers who focus on improving delivery speed and competitive pricing may be able to compete well. Retailers can become more showroom than retail centre, displaying their product for the purchaser to then buy online.
AMAZON’S IMPACTS ON INDUSTRIAL PROPERTY
While market disruption from Amazon could push retailers into some big decisions, the impacts on industrial property may be considerably more positive. As noted above, Amazon recently leased a massive block of industrial land – this will form part of its warehousing arm.
The emergence of web-based retailers necessitates growth in warehousing real estate. Goods have to be stored and shipped from somewhere, and Australia’s quality of industrial property sets it up well to meet this demand.
We could see bigger drives towards this kind of real estate – especially close to large-scale freight and air links. The air freight capability of the Canberra Airport may allow storage and distribution centres around the territory to become delivery hubs for online retailers. Amazon has disrupted the market, there are no two ways about it. But the impacts for commercial could be fantastic.