Aussie ‘sheds’ becoming high tech ‘Campus Style Distribution Centres’

Interlink HK 2

The traditional Australian industrial ‘shed’ is fast becoming a skin for the high tech, carefully designed industrial fitouts required by our largest industrial occupiers, according to the latest research from Colliers International Evolution of Warehouses: How Industrial has transformed.  A key element of the ongoing success of our industrial sector, which has reaped owners world class yields over recent years, is scale, a trend which is increasingly important in industrial markets across the globe.


Known as ‘Campus Style Distribution Centres,’ these large scale industrial assets are a must for major groups such as DHL and CEVA, both of which are looking at distribution centres now in excess of 75,000sqm. This trend to larger facilities which are able to handle greater quantities, is widespread in Asia, where most cutting edge facilities are now at least 150,000sqm.  Facilities such as Interlink in Hong Kong which comprises of 213,000sqm and Logistic Republic – Taipei Park in Taipei, which upon completion in 2017 is expected to comprise 264,000sqm.


“The significant growth in logistics demand has led those operators to consider more effective ways to move goods through the process,” said  Malcom Tyson, Managing Director of Industrial at Colliers International.  “Therefore larger centres fitted out with sophisticated facilities, such as automated picking and sorting systems, are necessary in order for operators to benefit from economies of scale.”


There are a range of features that are becoming commonplace in today’s sheds, including slabs that can handle greater loads, larger cubic capacity and high bays. To enable the best use of this space, greater use of robotics and high-tech picking and sorting systems are being implemented.


“Historically warehouses have been relatively simple buildings and there was very little focus put on the internal fit out,” said Mr Tyson.  “This has changed whereby now the internal fitout is carefully designed, and then the exterior is designed as the skin for these high tech operations.”


There is, however, still significant divergence from these highly advanced warehouses with more simplistic designs still commonly in use. At a broad level, it is primarily the large 3PL groups, as well as large supermarkets and FMCG groups that are the most advanced. The scale required by these groups, as well as the speed required to move goods, makes significant investment in fit out worthwhile. They are looking to create improved efficiencies in better designed buildings.


This trend has been prevalent in European and American markets for some time. Before 2011, only one of Amazon’s 10 distribution centres in Europe was larger than 90,000sqm. Today, 10 out of 27 Amazon distribution centers are larger than 90,000sqm. In fact, e-retailing demand is growing so fast, facilities need to be designed with expansion space built-in, given the distinct possibility that a retailer’s needs will have outgrown the facility by the time it is ready. In many global markets, this is putting significant pressure on what are already very tight land and planning conditions.


“Supersized warehouses are certainly coming our way,” said Mr Tyson.  “I would suggest that by 2018, it will not be unusual to see warehouses in Australia in excess of 200,000sqm.


The growth of logistics is tied to Australia’s population growth, which in turn is driving new home construction and stronger retail trading.


“Population growth in the states of NSW and Victoria is driving strong economic growth, with the two states reporting 3.2% and 3% economic growth respectively in the last financial year.  These are the two markets where we’re experiencing the strongest demand for well-positioned, modern industrial facilities,” said Mr Tyson.  “The cost of building and fitting out a distribution centre is only a portion of the ongoing movement costs for these operators, so being located in close proximity to key infrastructure is critical to the movement in and out of goods and the associated cost.”


The forecast growth of many of these operators is also aggressive. Many are now looking to partner with developers of industrial facilities, particularly those with significant land holdings, to ensure that they are able to access a pipeline of development.


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