Warehousing is some of the most exciting Australian real estate. Here’s how trends like e-commerce are creating a bright future for the sector.
Last December, Amazon officially launched its Australian website, ushering in a new generation of online shopping options for local shoppers. What sits behind the website is a massive distribution network, with Amazon opening a number of ‘fulfillment centres’ across the country to make it as easy as possible to deliver goods to Australian shoppers.
These fulfilment centres are at the top end of a massive shift in commercial warehousing in Australia. While Amazon needs massive distribution centres to keep up with demand, every e-commerce site needs facilities to store and distribute goods to customers who increasingly demand conveniences like next-day delivery.
Beyond e-commerce, the scale of new construction projects, from transport and rail through to high-rise residential, are increasing the demand for flexible storage spaces to handle the ever-growing volume of materials that Australia’s cities demand.
All of this is transforming the humble warehouse into the central node in a complex supply chain – and it’s driving uptake across the country for high-quality space near our major cities.
Just how big is e-commerce in Australia?
Even before Amazon’s official forays into Australia’s retail sector, e-commerce is booming. According to Statista, the country’s e-commerce sector grew 10.8 per cent in 2017-18, crossing the US$12 billion mark (AU$16.6 billion), compared to just $9.8 billion in 2016.
Those growth numbers aren’t going anywhere just yet either – Statista predicts that the total e-commerce sector will grow to $14.6 billion by the end of the decade. As this number expands, it’s also creating greater demand for commercial-scale warehousing on the periphery of Australia’s cities.
According to figures published in the Sydney Morning Herald, the city has seen a five-fold increase in industrial properties within the city between 2013 and 2017. While Sydney’s lack of real estate and size mean this trend is particularly pronounced, it’s not an outlier. This same trend is playing out in every major city across the country.
Even Australia Post has noted the increase, seeing a 5.6 per cent lift in parcel numbers in 2017 alone, thanks to in large part to increasing e-commerce sales.
Opportunities beyond e-commerce
While online shopping has opened up a very 21st-century demand for commercial warehousing, it’s not the only big trend driving investment in this space. Take construction for example. As building sites across Australia’s cities consume more raw materials, the need for effective storage and distribution is going to be stronger than ever.
This is also partly driven by the same lack of real estate that’s driving demand for warehousing near Australia’s cities. Working on inner-city construction sites means it isn’t feasible to store large quantities of building materials on-site, while the need for standardised materials means a single distribution facility will be serving a wide range of infrastructure and construction projects.
Now the types of warehouse that a major e-commerce player needs will be very different to those that a construction supplier does. However the essentials will be the same and will be underpinning the decisions investors are making in this space. Access to solid transport options, for example, will always be a must for any property that’s going to see large volumes of materials and products.
The warehouse of tomorrow is also getting smarter, with greater use of automated tools to speed up inventory management, which in turn is having a knock-on effect for the design and use of Australia’s current stock of facilities.
So, with more and more of us relying on online shopping and next day delivery instead of heading to the shopping mall, the demand for clever, convenient warehouses near Australia’s major cities looks to be in strong stead.