The imminent arrival of e-commerce giant Amazon in Australia will have a positive impact on industrial property values, a negative impact on some retail property values, and require change in strategy from both sectors to reap the most benefits.
That’s among of the findings of the latest House View report authored by Luke Dixon, AMP Capital’s Head of Real Estate Research.
“Strong future growth in e-commerce is great news for the industrial sector, which will benefit from rising logistics and e-commerce demand,” says Dixon.
“Meanwhile the retail sector is facing headwinds from technology disruption and the mooted entry of Amazon is forcing local retail operators and shopping centre managers to invest in customer and delivery services,” Dixon adds.
Great news in the industrial sector will only come to those who are prepared though.
Luke Briscoe, AMP Capital Managing Director, Office & Industrial, says being a player in the logisitics space will involve finding or utilising the right assets to making them suitable for e-commerce environment.
“Commercial and industrial real estate is a platform to support businesses in their success,” says Briscoe.
“In order to be able to be the partner of choice for Amazon, or any other customer for that matter, we need to understand their business and how real estate can be used an enabler for their business model,” Briscoe says.
Briscoe says AMP Capital is itself leveraging its industrial capability to ensure it understands the Amazon requirements to best provide a logistics, office or retail solution for them.
“For an e-commerce customer like Amazon, which promises two-hour delivery and free shipping for its Amazon Prime customers, meeting their property needs will involve building owners providing solutions in both the traditional industrial markets and inner city locations,” says Briscoe.
The reason for this is that Amazon will likely deploy a hub and spoke logistics framework to meet their delivery-time guarantee in Australia.
Briscoe believes this will likely involve having a combination of larger 50,000sqm warehouses in the traditional industrial markets, supported by smaller 10-20,000sqm ‘last mile’ logistics spaces or ‘dark stores’ closer to the end consumer in the inner city.
“Ultimately we are in the business of creating exceptional real estate experiences to support our customers in their success,” Briscoe says.
“Times have significantly shifted in the real estate sector, with customer centricity being a major driver of real estate strategies across the country,” – he says ”
All up, AMP Capital predicts Amazon will take up as much as 350,000 sqm of gross space by 2021.
The arrival of the likes of Amazon will not be such a positive for the retail sector though. AMP Capital predicts that shopping centres and precincts will need to become more “experiencial” to thrive.
“It will drive adaptation in the tenancy mix, moving away from electronics and fashion to food and beverage,” says Dixon.
“Destination assets like regional malls with higher levels of entertainment and experiential offering best placed to defend against consumer shrinkage,” he says.
In the office sector, the impact will be less felt, however logistics volume increase will create need for onsite services such as delivery lockers and increased truck delivery and loading locations, Dixon adds.
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