Warehousing in the e-age
The high-profile entry of Amazon in Australia and the automation of their warehouse operations has led many landlords to wonder how their assets stack up amidst the expansion of e-retail and the race to 30-minute delivery services.
Customer behaviour is influencing commercial property assets market with e-commerce’s market share of retail sales rising 59% in April compared to the previous 12 months.
While the aura of robotics generates headlines - and anxiety amongst workers - Director at LJ Hooker Commercial Bankstown, Jon Orsborn, said it was still some years before support tech for robots were a standard inclusion in fit-outs.
“Unless you are a very large multinational, full or near-full automation is simply cost prohibitive when you sit down to do the numbers,” said Mr Orsborn.
“You need a very long-lease over large premises – probably ten plus years over more than 10,0000sqm – which is a smaller portion of the (industrial) tenant market.
“Even for medium size tenants, it’s very difficult to calculate the ROI (Return on Investment) through the lack of case studies to benchmark against. But, inevitably, costs will come down as the tech market becomes more competitive.
“It is something landlords of larger-scale warehouses are dealing with now, but smaller investors don’t have to stress about the height of their warehouses for stacking or other features that make them ‘robot friendly’ for some time yet.”
Tenants adopting robotic technology for efficiencies have largely been focusing on the major markets of western Sydney and Melbourne.
Toll’s Advanced Retail and E-Commerce Fulfilment Centre at Prestons was one of the first in Australia. Across a 33,830sqm centre it incorporated 15,600sqm of automated equipment – almost half the area – in a mixture of goods-to-person tech, driverless forklifts and other processing innovations for anchor tenant Specialty Fashion Group (SFG).
But what impact will automation have on land-values? With larger-scale operators needing access to arterials, smaller scale brownfield landlords along these corridors have scope to team up with their neighbours to sell in one-line to appeal to developers.
And what about future designs? Will planning schemes be adjusted to allow for larger building footprints as fewer car spaces are needed as workforces be become automated? A lessened need for car spaces for workers would also allow for increased access for heavy vehicles, increasing capabilities for tenants.
But away from the larger premises suited to robotics, Managing Director of LJ Hooker Commercial Mathew Tiller said there would still be demand for smaller premises and industrial units, dependent on the strength of the state economy.
“In Sydney, rezonings have seen significant withdrawal of stock around the south – in areas such as Rosebery – and the central west, around Homebush,” he said. “The New South Wales economy has continued apace over the period, creating significant competition amongst tenants for brownfield industrial premises.
“Elsewhere, after several years of challenging conditions, the South Australian economy is in recovery mode, with business investment tipped to rise six percent over FY2019.” Industrial rents are approximately $113 psm net in Adelaide, according to LJ Hooker Commercial’s latest Industrial Market Monitor
In Tasmania, State Final Demand accelerated from 2.8% in the September quarter last year to 4 per cent in the March quarter.
If you want to discuss how your industrial asset is performing or future opportunities in your marketplace, contact your local LJ Hooker Commercial specialist or visit ljhcommercial.com.au.
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