Online shopping driving change

The global trend of online retail and e-commerce is having an increasing influence on Auckland's built environment, a leading property practitioner believes.

James Spence, Director Investment Management of global property provider and fund manager Goodman Group, says growing expectations for same day delivery of goods "will have a significant impact on the Auckland property market."

He says traditional distribution models, with warehouses in industrial locations distributing solely to retailers who then sell goods to consumers, are being supplemented: "Consumers are increasingly purchasing online and demanding faster delivery times for the goods they order."

CourierPost, a customer within Goodman Property Trust's $2.6 billion Auckland industrial portfolio, illustrates this growth. The volume of parcels processed through its Highbrook Distribution Centre, in East Tamaki has grown by 33 per cent in the last five years.

"Online sales now make up around 7-8 per cent of all retail sales in New Zealand compared to 20 per cent in Europe and the US. Consumer expectations are ever more demanding and local companies are starting to respond," he says. "In Auckland we have businesses and third party logistics providers telling us they want warehouses to be as close to the consumer as possible for supply chain efficiency."

Spence says that may mean augmenting larger fringe warehouses with more centrally located facilities. "It's directing our investment behaviour as we look to secure future development sites in more central locations."

Penrose is one of the suburbs keenly sought for its proximity to large consumer catchments.

"Consumers want their purchases delivered quickly, within hours of ordering; change is being shaped by the person in the home," he says. "Generation Z is growing up in an on-demand world, with extremely high consumer expectations that are only continuing to rise and spread to other generations. The end user is driving the location and type of warehouse development."

Spence says this trend, together with older industrial areas being rezoned to mixed use under the Auckland unitary plan, mean some commercially zoned land is being lost to housing. The limited supply of well-located developable land is also contributing to the 1 per cent vacancy rate across the Auckland industrial market.

"There is more demand than supply," he says. "Population growth and the intensification of the city is putting further pressure on warehouse managers to deliver goods efficiently and extract greater value from their warehouse investment.

"Technology and automation are improving the performance of existing warehouses. In markets such as the US and Asia, we are seeing increased use of automation where labour is tight, while limited land availability is seeing the growth of multi-level warehouses."

Development of autonomous vehicles moving freight and delivering goods could also have a significant impact on the logistics sector, says Spence: "We'll see this technology here eventually."

But it all comes back to the consumer. Once they start to experience a same-day delivery, or within a few hours, that becomes the standard all other providers need to match.

"Businesses will have to react to stay competitive, and some are already doing it. A number of supermarkets and large format retailers are examples of businesses delivering most of their items straight from the warehouse."

"We have very strong population growth in New Zealand. Auckland is the fastest growing region and development is intensifying with public and private investment," he says.

"Infrastructure and residential projects across the city make ownership of sites close to the urban population, strategically important.

"This is where we are focusing our business growth."

For more information, please visit www.goodman.com/nz