E-commerce shakes up industrial property market

Internet Retailing

6th Nov 2017

Australia’s growing e-commerce sector is shaking up the industrial property market, as expectations around same-day shipping create demand for distribution hubs closer to CBDs and competition from overseas players require greater cost efficiencies.

This is according to David Brandon-Cooper, national director of occupier services at Colliers International, who wrote in a recent blog post that leading manufacturers, logistics companies and distribution centres are changing the way they operate their warehouses and how they distribute.

“As e-commerce continues to grow this will impact on the logistics sector, requiring greater efficiencies to maintain competitive pricing and hold market share against global competitors with larger scale entering the Australian market. Their cost per unit will be cheaper than what its Australian operator can feasibly achieve,” Brandon-Cooper, said.

He said that to remain competitive, logistics strategies need to factor in a number of key considerations, including new industry benchmarks and customer expectations, technology and maximum cost savings.

“As global organisations continue to raise their presence throughout Australia, they will also raise the standard for expected delivery time for purchased goods and ease of purchase,” he said, noting the rising number of organisations offering free shipping, same-day shipping and even three-hour delivery.

“To meet these new benchmarks, we may see distributors moving away from large regional distribution hubs to a number of smaller distribution centres within close proximity to large catchments of customers,” he said.

“An advantage for businesses located in fairly close proximity to CBD areas is the ability to access a large population area. This means organisations can provide a fast and efficient delivery service to a large quantity of potential customers in one area.”

With land values rising, particularly in key locations such as Sydney and Melbourne, Brandon-Cooper expects developers and tenants to start building upwards rather than outwards.

“This will ensure 3PL and e-commerce users can provide cost effective delivery services for end users, particularly as their locations are usually close to the consumers of the goods final destination,” he said.

New technology, such as delivery via drone, could provide another way for businesses to provide fast and efficient delivery without having to relocate to pricier CBD properties. And it’s only a matter of time until artificial intelligence, robotics and the Internet of Things begin to reach the industrial sector.

Brandon-Cooper wrote that these changes may actually help Australian businesses compete with new global entrants, as greater efficiency may help them find savings on their logistics and distribution networks and ensure a reduction in the price of their end product.