JLL says proximity and intermodalism valued while ALC warns of infrastructure issues surrounding facilities
By Rob McKay | July 18, 2013
A paradigm shift in the way retailers, other major transport users and transport and logistics firms are using warehouses and distribution centres (DCs) is starting to be felt in the Australian industrial property market, real estate firm Jones Lang LaSalle (JLL) says.
The property firm has highlighted what it sees as a change in distribution strategy to smaller, strategically placed positions, saying that it is affecting property demand from major transport and logistics operators.
If borne out, such a development could be expected to place increased pressure on freight transport infrastructure planning and development, which the Australian Logistics Council (ALC) insists is already struggling with an earlier move to very large DCs.
JLL points to the likes of international players TNT and Kuehne+Nagel joining large local operators, such as Linfox and Toll, searching for and developing mid-sized properties.
Toll’s new parcel facility in western Sydney and property developer GPT Group’s backing of logistics-focused developments are seen as differing manifestations of the same trend.
JLL Head of industrial Corporate Solutions Andrew Maher tracks this back in Australia to the notice taken of Woolworths opening its Hoxton Park distribution centre in Sydney’s west in 2010.
Maher sees the trend as part of a broader move to intermodalism that swept the US about six years ago and is overdue here.
He points out that WalMart in the US now focuses new warehouse developments on proximity to rail links.
The move away from huge distribution hubs to smaller, more strategically positioned assets is an international phenomenon that was outlined in April during the visit by JLL’s global Supply Chain & Logistics Solutions Managing Director, Rich Thompson.
He challenges the assumption that transport is a relatively minor expense, pointing out that it can account for as much as 50 percent of total operating costs for companies.
Meanwhile, a freight infrastructure system already struggling with handling large DCs may not be well placed if JLL’s trend analysis is realised broadly.
The ALC has consistently warned that the system has had trouble coming to terms with large facilities.
The growth of specialised logistics facilities such as distribution centres and warehouses has undergone enormous growth in recent years, it says.
It points out that a report last year by property firm Colliers found the total amount of floor space transacted in the eastern seaboard capital industrial markets almost doubled between 2009 and 2011, with the average transaction increasing from 21,000 sq metres in 2009 to 27,000 sq metres in 2011.
“The growth of these super-sized warehouses and logistics centres is not surprising given the potential efficiencies on offer,” ALC Managing Director Michael Kilgariff says.
The attraction has been significant gains in productivity and efficiency along with safety benefits as a fewer number of trucks are needed for the same freight task.
For its part, Toll is focusing generally on “centralising and consolidating” but much “depends on what business we’re talking about”, a spokesman says.
Intermodal issues remain crucial and the firm likes to be close to rail links and its customers but it was very much a “horses for courses” call, he adds.
You can read more on the strategic freight property debate in the September edition of ATN.
