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Why we need more multilevel warehouses

The growth of e-commerce has put an emphasis on rapid speed in delivering purchases to customers. In order to stay competitive, businesses need to be able to quickly and efficiently distribute their products, which can be optimally achieved through operating in urban areas.

However, the high demand and perpetual lack of space in these areas is preventing businesses from having a competitive edge in their distribution network. Multilevel warehousing is the next logical step – particularly in Sydney’s scarce industrial property market.

There is a need for at least 300,000sqm of warehousing in inner Sydney over the next five years, according to TM Insight’s research investigating occupier demand.

Due to the inadequate supply of land to meet these demands, the industrial property market will need to maximise land use through multilevel warehousing, a common concept in Europe and Asia.

Just like residential properties, industrial property needs to go up.

Early adopters

Initially these multilevel warehouses in Sydney will most likely be purpose-built for single blue-chip companies, however, as demand grows for these types of facilities, it will lead to speculative builds for multi-tenanted buildings.

These types of multilevel warehouses would target high-worth occupiers, such as air freight forwarders, electronics and healthcare businesses.

While multilevel warehouses will enable businesses to operate in an ideal location for optimal distribution of their products, there are impacts that developers, occupiers, planners and the industrial property market must consider.

Impact on developers

The rise of multilevel warehouses is likely to lead to a surge in values for inner-city industrial properties capable of being converted into high-rise multi-storey warehousing.

Australian developers will struggle to find experienced designers and builders to create multilevel warehouse developments. To overcome this, Australian designers and builders must collaborate with designers and builders in Europe and Asia who are well-experienced in these developments.

In Asia, where multilevel warehouses are common in large cities, employee and transport access to the facilities becomes a pivotal issue.

As employment density will dramatically increase in these areas, developers, occupiers and planners must consider larger car parks, greater public transport accessibility and mitigating possible road congestion issues.

Cost of warehouse space on the rise

As warehouse space is becoming more expensive for occupiers, they must work the space harder by selling more with less inventory and tightly controlling their inbound supply chain.

This could lead to occupiers investing more in automation, as there are types of automation able to cater for occupiers with lower height tenancies of six metres typically found in multi-storey warehousing.

Truck access in multilevel warehouses is a paramount issue. In Asian multi tenanted multilevel buildings, truck access is strictly controlled by the landlord on a ‘user pays’ system similar to a city car park.

Landlords charge trucks by the hour and this ensures that trucks do not sit idle and congest the limited dock and queuing areas.

The flow on effect of this is that transport costs rise, both direct costs and indirect costs for offsite truck parking. Third party logistics companies such as Linfox and Toll will no longer have the luxury of using warehousing yards as free truck parks, forcing them to seek alternative yards typically placed in waste land nearby.

This then leads to value increases for waste land capable of being converted into truck parks.

Embrace change

While it may be some time before Sydney’s industrial property rises to the 24 levels of Goodman’s Interlink warehouse in Hong Kong (pictured above), multilevel warehousing will play a large role in the next wave of Sydney’s industrial developments.

Our industry, developers and planners must embrace this change and appropriately plan these buildings and surrounding areas.

Adam Noakes is the director of supply chain for TM Insight.

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