The rapid acceleration of e-commerce, global supply chain challenges and buying frenzies have changed supply chains forever. We asked some of the industry’s industrial experts for their take on the trends.
Once hidden from view, the industrial and logistics sector stepped into the spotlight last year as COVID-19 underscored its importance in the lives of Australians. This is fuelling investment in new developments; Knight Frank’s latest research finds volume of supply is at “unprecedented levels” and is likely to exceed 2.2 million sqm in 2021.
Beyond the pandemic, the industrial sector has a central role to play in meeting a host of priorities, from solving the last mile conundrum to achieving net zero targets. So, what are the top trends to watch?
- Resilience: CBRE’s head of supply chain for the Pacific, Christine G. Miller, says 2020 exposed the risks of tight inventory supply chains. The ‘just-in-time’ model is now being replaced with a ‘just-in-case’ approach. “Increased inventory levels build resilience into supply chains and that is driving a need for increased space,” Miller explains. CBRE estimates Australia will need an additional 350,000 sqms of industrial and logistics space each year to meet demand.
- Flexibility: TMX’s executive director of property, Justin Fried, is emphatic. “Gone are the days of overly lean supply chains. Flexibility is key to meet growing consumer demands, especially for fast delivery.” Last year, TMX predicted that online retail sales would increase by 30 per cent a year over the next five years, Fried says. “Now our previously ambitious prediction is looking conservative”. Expect more organisations to replace their national distribution centres with regional models that service customers faster. “This will lead to organisations committing to more warehouses across the country to have inventory in each state.”
- Sustainability: Chris Telley, Vaughn Constructions’ senior development manager, says demand for green facilities has grown exponentially as payback periods shorten and as tenants “now expect sustainable features to assist with ongoing running costs of their facilities”. The Green Building Council of Australia has found that new Green Star certified industrial buildings produce 66 per cent fewer greenhouse gas emissions than standard buildings, and that a minimal two per cent upfront cost to support green design can result, on average, in lifecycle savings of 20 per cent of total construction costs.
- People first: Reini Otter, chief executive officer of Frasers Property Industrial, expects sustainability in the industrial sector will broaden beyond resource efficiencies and carbon footprints. “The last year has reinforced that people in the industrial and logistics space are critical frontline workers – from truck and parcel delivery drivers to the warehouse workers,” Otter says. “What we don’t see is the impact the operating environment has on the mental health and wellbeing of these people”. Otter says SuperFriend’s 2020 Thriving Workplace Survey shows around 45 per cent of workers in the transport and warehousing industry experience a mental health condition. Frasers Property Industrial has recently partnered with the Healthy Heads Trucks & Sheds (HHTS) Foundation, to continue to address the mental health issues faced within the sector and create healthier and thriving work environments – a key part of the company’s new premium estates model. HHTS was founded to promote the prevention and understanding of mental health issues in the warehouse and road transport industry, and to facilitate the development of a single national mental health strategy for its constituents.
- Cold chain warehousing: With its capital-intensive equipment, strict temperature requirements and energy dependence, cold chain has always been a demanding logistics segment. Additional challenges, from quality standards to the volume of goods, mean the “unbroken chain” of production, storage and distribution of fruit and vegetables has “never been more pertinent”, says chief executive officer of the Perth Markets Group, Rebecca Moore. The Perth Markets Group received development approval for two new cold-chain warehouses over 4,000 sqm each in February, Moore says, following the completion of a 3,500 sqm facility in 2020. “This is in the response to growth in demand as more people seek to shop with their local grocer,” she says.
- Mobile technology: While automation gets a lot of attention in the industrial space, CBRE’s Miller says increased investment will be directed to wearables like smart glasses, hand scanners and mobile robots that don’t require large-scale supporting infrastructure. “These technologies enable improved warehouse operations especially in those like e-commerce where volumes have grown exponentially,” she says. TMX’s Fried agrees. Most industrial businesses, especially those with volatile inventory, will adopt mobile automation, “which is flexible and scalable, in the sense that you add more or less robots according to how your business is performing,” Fried says.
- Multi-level warehousing: Multi-level industrial has gained a foothold in Asia and Europe as retailers look to reduce the time and costs of last mile delivery. In Australia, where new industrial supply has not kept pace with demand, multi-storey facilities are an obvious solution, says Vaughn Constructions’ Telley. Expect multi-storey warehouses that combine truck staging at lower levels, vertical lifts and robot pickers. Telley says Vaughn Constructions is working with clients on several multi-level options, mostly in Sydney. “But given land shortages in Victoria, Melbourne won’t be too far behind.”
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