Property focus

REDEFINING THE WAREHOUSE

Colliers has released its new white paper: The Industrial Propety of the Future.

Drive-thru warehouses, crowd shipping, drone deliveries and micro-fulfilment centres are all considered in Colliers recently launched The Industrial Property of the Future whitepaper. MHD sits down with the lead authors of the study to find out more.

The consumers of today look very says COVID-19 has accelerated the interconnected omnichannel operation, different to ten to 15 years ago. radical change in the industrial sector. they are exploring different technologies Technology has enabled shoppers “Disruptions around COVID-19 have and infrastructure to cope with this to purchase items at the click of a button shaken up the supply chain again, and increasingly complex environment” from a mobile phone, desktop, shop we’ve found many of our customers in Monica says. or tablet. this space are looking to gain further Technologies such as blockchain and

Millennials are savvy online efficiencies from their property machine learning come into play to consumers, and they know what good assets,” Malcolm says. ensure visibility and stock efficiency in service looks like. They have demanding It has also highlighted the need for the supply chain. criteria around choice of delivery, speed resilience. “COVID-19 started to squeeze “To gain a meaningful integration of delivery and flexibility. This has placed every drop out of the supply chain. It was between digital and physical increased pressure on supply chain more important than ever to be able to worlds, machine learning can offer and logistics. pivot quickly and ensure that you could interpretations for what inventory

According to Malcolm Tyson, adapt your operations, and property plays needs to be held where and can offer Managing Director – Industrial at a huge role in this,” Malcolm says. very helpful solutions to predict demand Colliers International this shift in fluctuations” she says. consumer behaviour has caused the IS ONLINE SHOPPING For Tim Edwards, National Director biggest transformation in the industrial HERE TO STAY? – Victoria at Colliers International, sector in 15 years. With online shopping set for year-onCOVID-19 caused online shopping to

“This consumer trend is continuing to year growth of upwards of ten per cent move from a discretionary service, to an grow, and businesses have to respond. even before COVID-19 hit, Monica Velez, essential one. It’s put huge pressures on supply National Director, Logistics and Supply “People were forced to use online for chains that have simply never been felt Chain at Colliers International says basic needs. When bricks and mortar before,” Malcolm says. this change in consumer behaviour is stores closed, online was the only way

Considerations around where a here to stay. to go. This has shifted how people will warehouse should be, how it should However, she says the challenge for continue to shop. It’s no longer about perform, what technology should be many businesses is how they manage discretionary spending, but now about introduced are all decisions that are more to orchestrate the physical product using online for essentials like groceries critical than ever, Malcolm says. flows to get the product to the customer and household goods,” Tim says.

At the heart of this shift in requirement wherever they may be. for industrial property, experts from the “The consumer can shop from WHAT DOES THIS MEAN industrial team at Colliers have come anywhere now, from both physical and FOR PROPERTY? together to produce a deep dive into what digital points of contact. So, the retailers If consumer habits are transformed, this means for the future in their new have to ensure the customer has the what will this mean for the future of the white paper The Industrial Property of the choice while the internal processes warehouse? Monica says that warehouses Future. need to be set up to meet customers’ will need to become increasingly

While the initial concept of the expectations. This is challenging and as customer friendly. “The warehouse is paper goes back 18 months, Malcolm companies are trying to shift to a truly really reinventing itself as an asset. We

Malcolm Tyson is Managing Director - Industrial at Colliers.

might start to see options whereby the customer can pick up the item from the warehouse if that’s more convenient to them. So, we need to rethink how our warehouses will operate. Will that mean having a drive-thru customer-facing area for consumers to drop-by?” Monica asks.

A major driving factor in the innovations taking place for property, is the challenge of last-mile delivery. “From a supply chain perspective, one of the biggest costs you have is transport. And the biggest portion within that is often the final mile. If you can fulfil orders closer to your customer, then you can significantly reduce overall cost,” Monica says.

There is a number of opportunities and approaches to get closer to the customer. Some may adapt their warehouses and present them as a showroom and have some areas as customer-facing. Others have started to utilise micro-fulfilment centres closer to populated areas.

“There are different schools of thought here depending on the operation you are running. Take Coles and Woolworths for example. Woolworths is fulfilling online orders in store using the microfulfilment model. But Coles, is fulfilling online orders from larger centralised warehouses. Both have their benefits and challenges,” Monica says.

While millennials may have developed a reputation as the instant gratification generation, flexibility is also a core value for this group, and Monica says that choice will dominate the retail landscape of the future.

“Companies will open up different delivery service levels at different costs. If you want it in two hours, you pay a premium price and then next-day or in two to three days will come at a cheaper

Monica Velez, National Director Logistics and Supply Chain at Colliers.

cost. This scalable approach and multiple pricing approach will be on the rise over the next few years,” she says.

Sustainability options could also come into play here, where the consumer can make a decision based on the environmental impact of the delivery. “You might be happy to accept that your delivery will arrive later if you know that it has less of an impact on the environment,” Tim says.

TECHNOLOGY: AUTOMATION AND CROWD-SHIPPING

Underpinning this shift in consumer behaviour is the technology that is enabling businesses to pivot and react quickly to meet the demand.

Monica highlights automation as a driving force for logistics and supply chain. “We are seeing our occupier clients implement discrete automation solutions to address the biggest pain points or strategic objectives within their warehouse operations. Whether that be efficiency, safety, speed to market – they are addressing them with automation whenever feasible and viable.”

We are seeing fully automated warehouses in the FMCG industries, , but industries such as fashion retail and others are behind and Monica predicts that we will start to see an increase in the uptake of automation over the next five to ten years in these areas.

While some of the more futuristic technologies such as drone deliveries are yet to be utilised on a large-scale when government regulations are overcoe, Monica says the technology is ready.

“Drone deliveries are happening now. In Canberra there is a trial taking place for drone deliveries. The technology is here but currently it’s about waiting for

Tim Edwards is National Director - Victoria at Colliers.

government regulations to be developed and rolled out. My prediction is that it will be around seven to ten years before we see this kind of technology being implemented freely,” she says.

One area of technology that Monica says will become more commonplace is crowd shipping. Much like an UberEats or Deliveroo delivery, Monica says this kind of delivery model will also increase its uptake into the freight sector.

“Anyone with a vehicle will be able to become a courier driver and consumers and retailers will have access to a huge network of couriers on demand,” Monica says.

A POSITIVE OUTLOOK FOR INDUSTRIAL

Despite the economic challenges that many industries have faced during COVID-19, Malcolm says that the outlook for the industrial property market is positive.

“The industrial asset class is front and centre. Prior to this boom in online shopping and consumer demand, people didn’t really understand warehousing and logistics. They had a view of residential, retail, office and hospitality but they never really considered logistics,” he says.

However, this is changing. Throughout COVID-19, supply chain and logistics has been front and centre. With distribution centres being more critical than ever.

“There’s a greater understanding of the industrial market, and that has been accompanied with a lot of investment both onshore and offshore. We think this sector is going through a rapid transformation and we’re all really excited to see where we end up,” Malcolm says. ■