THE PROPERTY DEVELOPMENT REVIEW
average of two days and cost $9. This year that has blown out to 5.6 days and costs $10.26. In that same period, the demand for faster shipping has driven a 136 per cent increase in retailers offering express delivery. That is putting pressure on the sector— the biggest increases in online spend are in regions with less last-mile infrastructure. Annual online transaction growth by state
And while drone deliveries are being trialled by the likes of DoorDash, that method will remain out of reach for most retailers in the foreseeable future. The issue has become so critical, governments are investing in a solution. Earlier this month the NSW Government’s Transport Asset Holding Entity (TAHE) announced it was seeking partners to begin an 18-month trial of three last-mile freight microhubs, at Waverton Station and the Wynyard Tunnels, aiming to “transform urban logistics by reducing congestion, lowering emissions, and enhancing delivery efficiency”. Property Council NSW executive director Katie Stevenson
Source: Australia Post 2024 Inside Australian Online Shopping eCommerce Industry Report
says that given the current chronic shortage of logistics space in Sydney’s inner-city areas, the initiative is welcome. “Innovative solutions to last-mile delivery challenges can help to reduce congestion and lower emissions in critical areas of the city, all while supporting the efficient movement of goods.” And the private sector is turning its attention to the problem too. The potential of repositioning Repositioning assets, whether they be in city locations or in neighbourhood precincts, is being tipped as the way forward for last-mile growth. Office assets could be worth exploring, according to research from Resolve XO, due to sustained high office vacancy rates,
growing pressure on ageing assets and the ongoing supply demand imbalance. And given the sustained high rents in the sector, it could indeed be a lucrative choice. Current average rent, incentive comparison
Industrial real estate at Mascot and Ultimo, according to Resolve XO, attracts average net rents of $540 and $630 per sq m, while at Chatswood and Parramatta, net rents sit at $459 and $463 per sq m, it said, and effective rents for both sectors continues to converge. While converting offices to last-mile logistics may be a big ask in the short term, HMC Capital’s Last Mile Logistics Fund is currently supporting the transformation of retail shopping assets “in key growth corridors into convenient daily needs centres with essential last-mile product delivery logistics infrastructure,” according to Sharma. “We are building on our track record in the adaptive
Figures are indicative of cost per square metre. Source: Resolve XO
reuse and asset repositioning of the former Masters warehouses into HomeCo Daily Needs shopping centres [that are] serving the highest population growth corridors in Australia. “HMC Capital’s LML strategy benefits the capacity of national and local retailers as well as mum-and-dad businesses to optimise product delivery for customers.” The benefits of turning major big box retail centres into last-mile logistics locales is that they have great access, good carparking, and large loading facilities, Sharma says. “These assets are strategically located in A-grade locations with substantial
population growth and expansion potential, but they haven’t had the historic investment to be fit-for-purpose for retailer and customer demand—especially as last-mile logistics capacity becomes more and more important.” More investment in the sector is inevitable, but how this plays out in real estate remains to be seen.
Australia’s last mile market is projected to grow at compound annual growth rate (CAGR) of more than 10 per cent over the next five years.
October / November 2024 – 15
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