Focus Page - Last Mile Redesigning Industrial
The ‘last mile’ delivery of goods is increasingly becoming an issue for e-commerce operators around the world.
The ‘last mile’ delivery of goods is increasingly becoming an issue for e-commerce operators around the world. Consumers are progressively seeking shorter delivery times and an easy and fast returns process. Retailers are key users of logistics in Australia, contributing 36.8% of revenue, according to IBISWorld (May 2018). With retailers continuing to grow their use of online platforms to expand customer bases and compete with online retailers, demand for logistics is set to rise.
This ‘last mile’ issue is resulting in shifting patterns of demand for industrial land. Infill locations are being sought in population centres to reduce delivery times. With larger sites in outer areas for storage and distribution to the infill locations, as well as delivery to customers in outer areas.
Demand for infill sites, to solve the ‘last mile’ issue, and outer sites along transport corridors is impacting land values and starting to push up rental rates.
Inner submarkets in most states are facing supply constraints due to rezoning of prime industrial sites for residential and mixed-use purposes. While outer submarkets face constraints due to the slow turnaround in rezoning of land to industrial and the required addition of services and infrastructure.
In South Sydney, for example, the supply of vacant industrial land is extremely limited. This is owing to the largely built up nature of the precinct, as well as ongoing stock withdrawals and rezoning of former industrial sites to accommodate higher order uses. This is driving up land values and rents. The next option is to build upwards, as some of the more dense and expensive industrial locations such as Mascot, Rosebery and Alexandria are considered suitable for multi-level warehouses as density increases are permitted.
Technology and Design
The desire for quick, efficient delivery of goods to consumers and the increased cost of operating in inner areas, where land supply is limited, is resulting in greater use of automation and changing building design.
Strategies for greater efficiency, lower inventory and new innovative ways to incorporate technology within warehouse design include:
- automated stock management and storage systems,
- materials handling automation (including high-speed unit and voice picking and robots),
- intelligent conveyor systems,
- wireless communications,
- and well-designed cross-docking.
These techniques can make warehouses smarter, faster and more economical, as well as reduce order status calls, increase sales and reduce costs.
Due to land constraints, multi-level industrial has a foothold in locations such as Hong Kong and Singapore and is expanding into cities such as Munich and Paris.
While Australia is unlikely to reach the heights of Hong Kong, due to planning restrictions, industrial buildings are still likely to reach up to five levels. This requires a complete change from the older warehouse model to one that maximises use, storage and access to meet new industrial needs.
Multi-level warehouses are a game-changer. They are more specialised, will require new systems and new considerations when valued. The issue that property valuers and owners will have to grapple with is whether this new specialised building is going to result in buildings becoming too tenant-specific and therefore reduce future tenant appeal. While some of the technology incorporated in buildings may be transferable, others may not, resulting in it having to be removed/altered before another tenant is able to lease the building.
There is also no guarantee that the multi-level concept will work in Australia, like it has in Asia and the United States. In the United Kingdom, for example, the concept has had mixed success. The two-level SEGRO X2 located at Heathrow took eight years to fully let after completion and, following approval in 2014, Uniserve is still to build its multi-level warehouse in Felixstowe. Amazon, however, currently operates successful multi-level warehouses in the UK, with plans to build more.