The changing shape of warehouses on the city fringe

Condensed, lower clearance facilities begin to emerge across city fringe locations. 

Written by Khalid Hourani, Director of Project Management

Driven by increasing land prices, the declining availability of industrial space and the continual rise of eCommerce, multi-storey warehouses have begun to emerge in city fringe locations across Australia.

Multi-storey warehouses are condensed lower clearance facilities, visually they appear vertical and more compact than typical industrial warehouses found in metropolitan or regional areas; and, as the name implies, comprise two or more storeys of usable storage area.

Fast distribution to the desired target market and last mile users is usually a critical factor for occupiers of multi-storey warehouses, therefore these facilities are strategically located on the city fringe with close proximity to the CBD.  

Colliers International’s Spotlight on South Sydney research series, by Sass J-Baleh, indicates recently reported strong take up of these smaller industrial units (often co-located warehouse and ancillary office space) in the South Sydney sub-market. Colliers Research also noted increasing use from creative users (IT, media and retail sectors) relocating from city locations due to rental premiums.

Although it’s early days for multi-storey warehouses around Australia, the concept of multi-storey warehouses is not new. These facilities are utilised around the world, particularly throughout Asia where major cities are very dense and land values are extremely high. Various Australian organisations have been familiar with these warehouses for the past decade, however they have only recently become a financially viable option due to changes in market conditions and the ‘need it now’ expectations of millennials.

To provide industrial occupiers with a deeper understanding of these emerging warehouses, we’ve put together a breakdown of the benefits and implications of multi-storey warehouses in city fringe locations

Benefits of multi-storey warehouses in city fringe locations for occupiers

Potential to provide higher efficiencies in operating costs due to efficient use of space.
Access to modern, purpose-built facilities.
Maintain a competitive advantage and point of difference by occupying state of the art facilities within close proximity of target markets.
Acquire warehouse space within city fringe locations which would typically be unfeasible.
Typically, more sustainable and environmentally friendly facilities.
Maintain a presence in locations that are closer to target market, reducing distribution costs and time
Enable a ‘smarter way of doing business’.

Implications of multi-storey warehouses in city fringe locations for occupiers 

Typically, a higher upfront capital cost.
Can receive strong competition from office users who are occupying space in the same areas. This is currently taking place in Sydney’s Southern suburbs such as Alexandria, Mascot and Botany.
Not ideal for high demand power users who require above average power use, due to existing infrastructure limitations.
Requires forward planning of around two years which can be difficult when forecasting growth and changes in the market.
May require upgrades to technology and operating systems.
Overall, multi-storey warehouses are a strong and viable option for organisations that need quick distribution to highly populated areas. Organisation’s whose operations and products are suitable for smaller, condensed facilities and could co-locate their office and warehouse functions in one facility would be ideal users.

As the development of multi-storey warehouses increases across Australia, we expect these facilities to appeal to higher turnover products for example retail occupiers with high turnover products such as car parts and plumbing supplies to clothing and consumer goods. However, given there is currently limited availability of existing multi-storey warehouses these facilities will incur larger short-term costs.

We expect to continue seeing Sydney leading the way with multi-storey warehouses across city fringe locations and Melbourne to follow suit in the coming years as organisations look for efficient and financially viable options to combat changes in the market, changes in customer demands, advancements in technology and the rise of eCommerce.

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