Warehouse scarcity in Amazon effect

Watch out for shrinking amounts of warehouse space as Amazon’s Australasian arrival makes waves in the New Zealand retail market, real estate agents warn.

Bayleys industrial and logistics national director Scott Campbell said the arrival of the e-commerce retail giant would accelerate a trend of shrinking warehouse space, especially in Auckland.

Amazon opened its first Australian warehouse in Melbourne last week.

Cambell expects its arrival to drive the redevelopment of innercity brownfield sites into ‘‘lastmile’’ delivery centres.

New Zealand’s annual online retail spend is an estimated $4 billion, and while online shopping represents a relatively small proportion of overall retail spending it is growing at a faster rate than bricks and mortar retail.

Campbell said: ‘‘The growth in e-commerce has forced retailers to reassess their property needs.

‘‘To fulfil customers’ orders quickly, they need warehouses, with international studies showing that e-commerce businesses need three times as much warehouse

"E-commerce fulfilment is in its infancy, really." Scott Campbell, Bayleys

space as traditional brickand-mortar retailers.’’

In 2016 industrial property made up 56 per cent of commercial property sales in Auckland.

‘‘E-commerce has the potential to turn industrial property into the hottest component of [the] commercial property market,’’ Campbell said.

Amazon has not commented on whether it will establish a presence in New Zealand, but brokerage firm Forsyth Barr has advised its clients that New Zealand presents a logical extension to Amazon’s investment in the region.

Campbell said location is the key to success for retailers.

‘‘To stand out in a crowded market, retailers are competing aggressively on reducing delivery times, which is creating increased demand for last-mile logistic.

‘‘E-commerce fulfilment is in its infancy, really, and there are a lot of different strategies being employed.’’

One of the more popular approaches is the ‘‘hub and spoke’’, whereby a main distribution centre – the hub – sends out material to smaller centres – the spokes – for last-mile delivery. Scarcity of land favours this approach, Campbell said.

‘‘Overseas, retailers are increasingly seeking out warehouse space close to consumer hubs and residential centres.

‘‘And since competition for land in these areas is fierce, warehouses will need to grow upwards rather than outwards to accommodate stock, as many in Asia already are.’’

For same-day deliveries, smaller distribution centres tend to spring up near central business districts, he said.

‘‘We can also expect warehouses to assume some of the characteristics of stores as more retailing activity starts to happen inside distribution centres.’’

New Zealand retailers are already responding to the disruption in the industry.

The Warehouse Group recently partnered with New Zealand Post to trial a new shipping service for online shoppers, Shipmate, as part of its push to drive e-sales.

NZ Post’s network gives it significant delivery reach and it is talking to a range of companies about partnering opportunities.

‘‘More and more New Zealand brands are seeking to do business with us on e-commerce projects,’’ a NZ Post spokesperson said.

The launch of Shipmate follows NZ Post’s opening of two new processing facilities for logistics services. Its 2500-square-metre Taranaki Operations Centre serves the Taranaki region, while the purpose-built, 14,600sqm and $8 million Southern Operations Centre at Christchurch Airport’s Dakota Park serves the South Island.