Demand for industrial property is surging in New Zealand as retailers hold stock in the wake of recent disruption to the sector, according to the head of CBRE’s supply chain advisory across the Pacific region.
Speaking at CBRE’s Talking Sheds webinar, Christine Miller said that, rather than pushing large volumes of inventory through sales clearance channels, retailers were looking to increase their levels of ‘safety stock’, which in turn required more operational industrial & logistics space, plus new distribution models.
“We’re seeing businesses indicate that they are going to hold product for up to 12 months in order to avoid pushing it into the clearance channels,” she said. “Previously, we have seen the inventory costs at around 20% of supply chain costs, but as we see safety stock & inventory levels start to rise, the percentage will increase as businesses look at their products to determine which can be stored to enter the market at more of a fullscale retail price.
“This will have an impact on their balance sheets in terms of the inventory costs that they cover, but will also lead to them being more flexible & more resilient in the face of disruption. They are looking at the products that are faster moving & slower moving, and adjusting their distribution networks accordingly.”
Ms Miller said this effect was likely to be stronger in New Zealand than in some other countries: “New Zealand took a stronger approach than other countries by shutting distribution channels to non-essential businesses during lockdown, which in turn created more backlog for retailers in the discretionary spend category.
“We now expect to see storage & distribution requirements increase, and we do expect to see retailers really look to refresh their online fulfilment models & their omni-channel distribution. Holding more inventory, being more responsive to the final customer demands, means being closer to those points of consumption. This points to businesses spending more time looking to how critical a role industrial & logistics infrastructure can play in a business having some flexibility & sustainability in the face of disruption.”
The preliminary results of the latest CBRE industrial occupier survey echo this, revealing that connectivity & proximity to transport networks are high on occupiers’ agendas, regardless of the sector they operate in. Proximity to motorways & ports/inland ports rated the highest by logistics firms, manufacturers as well as retail & wholesale businesses. The survey will be released in a few weeks.
More important role for hubs
CBRE NZ’s national director of advisory & transaction services for industrial & logistics, Claus Brewer, said: “In addition to inventory management in a low vacancy market, we are also seeing emphasis placed on road & rail connectivity as vital attributes for occupiers looking to build their regional & last-mile delivery capability.
“In Auckland, the Otahuhu Logistics Estate provides a last-mile & wider distribution hub thanks to its road & rail connectivity. In the Waikato, the recent announcement by Tainui Group Holdings & Port of Tauranga that they plan to develop a 50:50 joint venture to bring the Ruakura Inland Port at Hamilton to fruition within 2 years as part of the Ruakura Superhub has fundamentally changed the Hamilton & North Island industrial landscape as organisations structure their networks to include the Waikato. And in the South Island, the opportunity to create facilities in the IPort (in Christchurch) is commanding great interest.”
Attribution: Agency release.