As technology, changing consumer and supplier behaviours, and a complex operating environment collide head on, the industrial property sector is facing significant change and challenges.
Demand for distribution and logistics property on the back of surging ecommerce patterns and supply chain dynamics has created a perfect storm in the sector.
Vacancy levels right around New Zealand are at all-time lows, construction hiccups have slowed down the development pipeline and a shortage of favourably-zoned land suitable for industrial growth means that existing stock is under severe pressure from a growing target audience.
‘Just in time’ strategies have morphed into ‘just in case’ approaches in the industrial market and this means more need for warehousing, says Scott Campbell, Bayleys’ national director industrial.
“In response to these supply-demand forces and inflationary influences, rents are on the rise and this is likely to continue.
“Therefore, effective use of space and operational efficiencies are important for managing both overall occupancy costs and catering for growth without necessarily needing a bigger warehouse.”
Campbell says while we’re not yet seeing multi-level warehousing being built in New Zealand as is happening in severely constrained global cities, new industrial buildings are getting taller to enable more volumetric storage.
“Updates to fire regulations stemming from improved sprinkler technology are enabling greater warehouse heights with new buildings typically now having more than 14.5m-high studs at the apex.
“This additional height allows for more effective racking, however, there’s still a lag on the supply side with automated capable racking hard to source.
“In parallel, we’re seeing increased utilisation of technology with conversations definitely turning to ways that automation can increase efficiency in warehouses.
“And while technology can enable more efficient use of volume, there’s a corresponding capex investment and this higher specification warehousing often requires substantially-stronger floor loadings.”
Campbell says pandemic-related handbrakes remain in the supply chain domain and we can expect to see this for some time yet so technology is being employed to iron out some of the kinks in the chain.
“There’s more automation around container movements with sophisticated GPS tracking managing the inflow and outflow of containers to streamline yard usage and to up-resource staffing at pivotal times.”
Despite bottlenecks in the delivery of new industrial stock to the market, two large state-of-the-art warehouses to service the fast moving consumer goods sector worth more than $250 million, are to be built south of Auckland.
Sorted Logistics and Cardinal Logistics have committed to new-build facilities at Drury South Crossing as distribution operators scramble to find sites where they can purpose-design warehouses to specific requirements.
Bayleys’ global partner Knight Frank says the supply side of industrial property must reset in terms of specification, location and capacity to better accommodate a mix of human and technological resources on a flexible basis.
Campbell agrees, with the rider that while new technologies have the capacity to both disrupt and enhance the daily workflows of industrial occupiers, there’s not going to be an overnight uptake.
“Will we see widespread use of autonomous or driverless vehicles and drone delivery?
“Well, it’s happening overseas with Amazon revolutionising industrial property through robotics with picking robots operating around the clock to fulfil the rapid delivery promises the company makes.”
Landlords and developers will need to work closely with industrial occupiers to ensure that new stock fits very specific operational requirements, is future-proofed, supremely secure and hits ESG and sustainability goals of stakeholders.