Rising costs and land values, coupled with demand for space, is expected to see Australia’s first multi-level warehouses be developed by the end of next year.
Commercial real estate firm CBRE made the prediction based on current construction costs, land values and forecast upturn in rents, stating that multi-level warehouses could be financially feasible in Sydney’s south come 2020, and in inner Melbourne within the next four years.
Kate Bailey, head of retail and logistics research at CBRE, said that these two markets have the most expensive industrial land values in Australia.
She said that values in South Sydney had soared by 67.3 per cent in the last five years, while Melbourne’s had almost doubled (up by 90.9 per cent) over the same period.
“With growth well above rental values, developer margins have eroded — driving developer interest in multi-storey warehousing,” she said.
Christine Miller, Pacific director at CBRE’s supply chain advisory division, said that location was rapidly overtaking rental price as the determining factor for businesses as they factor in their overall supply chain costs.
“Fast delivery is now a crucial requirement for a seamless omnichannel strategy and occupiers are growing increasingly concerned with securing locations in close proximity to their customer base in order to minimise costs and commit to faster delivery timelines,” she said.
“Tenants are increasingly prioritising location over rent, with occupancy spend at just 5 per cent of total supply chain costs and transport expenses making up 50 per cent of total supply chain costs — almost a third of which is in the last mile.”
Ms Miller added: “For an occupier to be in a key network location that provides quick and cost-effective access to population centres, this has the potential to deliver a really competitive solution for their supply chain.”
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.