MHD catches up with Tony D’Addona, General Manager, Workplace and Logistics at Stockland to find out why the leading property developer is well-placed to meet the increasing demand across eastern seaboard industrial property markets.
As e-commerce numbers soar, demand for industrial property that is well positioned close to major consumer markets continues to dominate the property space.
A recent report by investment bank UBS described industrial property as a bright spot in the real estate market as supply chains adapt and logistics operators adjust to changing consumer behaviour.
According to Tony D’Addona, General Manager, Workplace and Logistics at Stockland the golden rule of real estate has always been about ‘location’ and industrial property is no different.
“Where a warehouse is positioned in relation to the market it services is of vital importance and e-commerce is putting a major focus on ensuring the supply chain operation focuses on proximity to population,” Tony says.
Since the nation was forced to make the shift to online shopping during early COVID-19 restrictions, largely due to the closure of bricks and mortar stores and a nationwide ‘stay home’ directive, e-commerce volumes have reached record highs.
However, Tony says this trend was well on its way before the pandemic hit. “Changing customer needs and expectations have been the driving force to the shift online. Technology, in particular mobile devices have become such an important part of our lives and a major enabler of shopper convenience. This in turn changes the entire way a supply chain operates. It becomes primarily about speed to customer and reliability,” he says.
In 2019, Australia Post predicted that 12 per cent of consumer spending would be conducted online by 2021 and reach 16-18 per cent by 2025. However, COVID-19 accelerated this shift and online hit 12 per cent of total retail as early as March 2020. Furthermore, it is anticipated that by the end of 2020 online spend will hold 15 per cent of the total retail market.
Stockland is a one of Australia’s leading diversified property developers. Its operations in the logistics and business property space encompassing a portfolio of more than 30 assets, worth around $3 billion primarily across the eastern seaboard. Some of its key tenants include QUBE Logistics, Toll, AWH and major retailers. “We own about 1.2 million sqm of warehouses and at the moment our occupancy is in the high 90s,” Tony says.
With expertise in the development, management and ownership of physical property, Stockland has invested in strategic locations to ensure that Australia’s logistics and retail organisations can service the rising demands of consumers.
“One of the biggest disruptors this industry has seen for a long time is the shift to online. Customer experience is at the forefront of retailers thinking and supply chain efficiency and fulfilment is going to be a major focus for 3PLs and retailers. Where the property is located will play a major role in the overall distribution process including last mile operations,” Tony says.
E-commerce has heightened the focus to be close to the population. “You need to be close to road, rail and ports but you also need to be close to your end user, whether that is a business or consumer,” Tony says.
With this in mind, Stockland has invested in core locations to ensure that there is industrial property available close to Australia’s largest urban populations. “Most of our assets are in middle ring suburbs or close to major distribution arteries in Sydney, Brisbane and Melbourne. We have invested in close proximity to major existing population nodes and future growth corridors,” Tony says.
Stockland also benefits from being a major player in the retail property space. “Our broader Commercial portfolio also includes retail centres. We own more than 30 shopping centres around Australia, operating in this space not only provides us with important data and shifting consumer trends, but it also allows us to leverage our deep retailer relationships” Tony says.
Stockland works with major players on both their retail and warehousing needs. One such example is Australia’s largest home entertainment retailer, JB Hi-Fi.
“We recently completed a new industrial facility for JB Hi-Fi in Melbourne. We were able to work really efficiently with their team to secure this new premises because we already have a partnership with them through our retail network,” Tony explains.
With retailer and supply chain working closer than ever before, there may also be opportunities to work smarter around last mile logistics and the complicated and costly processes such as return logistics. With expertise across both retail and industrial property Stockland is in a unique position to support retailers through this transformation.
Furthermore, with transport being one of the most significant costs in the logistics puzzle, location is more important than ever.
“Rental costs are around five to ten per cent, but transport reaches around 40-45 per cent. The next evolution of distribution will be ensuring that the facility that services the end user is as close to them as possible. I think there will be some exciting and innovative ideas in this space in the coming years,” Tony says.
For Tony, e-commerce presents both challenges and opportunities as increased volumes and faster fulfilment times make a compelling case for technology and automation.
“There will be an acceleration in the use of technology and automation within the distribution and fulfilment process. This could be a major opportunity for the 3PLs to leverage their own scale and ability to invest in innovative solutions to service customers who don’t have this ability or appetite themselves,” he says.
As restrictions ease and we move into a new normal, Tony thinks much of this shift to online is here to stay. “People have become more comfortable with shopping online and been able to experience the benefits and convenience during a challenging time. The volumes may settle down a bit, but I think we will land well ahead of previous projections,” he says.
This is good news for the industrial property market both in Australia and worldwide as more logistics providers and retailers will be seeking to enhance their customer experience journey and as a result review their supply chain and fulfilment operations. “There is still a considerable amount of pending obsolescence in warehousing product in Australia that will not be able to cater to the demands of a modern supply chain operation, and this will create further development opportunities for us,” Tony says.
With increased demands comes a need for more reliable, well-located and modern warehouses and Stockland is well placed to service that demand.
“We have a $3.1 billion new supply pipeline of warehouse and business park opportunities that we will be rolling out across Australia’s major urban markets of Sydney, Melbourne and Brisbane over the coming years,” Tony concludes.