At the recent Sydney Industrial Real Estate Summit 2024, industry experts came together to explore the trends reshaping industrial and logistics facilities. From rising rental costs and surging demand for data centres to advancements in automation and a stronger focus on ESG, this year’s summit highlighted the evolving priorities and challenges facing the sector. Here’s a look at the key takeaways and what they mean for the future of industrial real estate.
Investment in automation is set to double by 2030. Facility variable costs account for 15% to 25% of total costs. Key considerations for automation-compatible warehouses include:
Automation solutions vary significantly based on customer needs, with some better suited for greenfield custom-built sheds and others for retrofitting.
Data centres are driving demand for facilities, with Australia being the 5th largest market globally. Major challenges include high power requirements, with examples like Singapore where data centres consume about 7% of the power. These properties can command 1.2 to 2.5 times the premiums of traditional industrial real estate contracts. Australia has 240 active data centres, with an expected annual growth of 13%.
Water supply is also critical, with some data centres requiring up to 1.8 million litres per day.
These facilities have high build costs in Australia and are an emerging market. Currently, customers are hesitant to accept floors beyond the first, it is expected this will change in areas with limited availability, such as South Sydney.
The growth in industrial space demand is increasingly driven by e-commerce, which has led to higher truck tonnage despite stable population growth. Trends show a consolidation of platforms, with Amazon, Walmart, and Shopify representing 70% of online sales in the US. The need for sub-48-hour fulfillment is rising, and Australia is expected to follow this trend, necessitating additional distribution centres closer to customers.
Power supply is a recurring theme across trends like automated facilities, data centres, and EV charging. New applications can take up to two years for power approvals, with temporary connections often not approved. This has led to investment in land without power approval, anticipating value increases if power becomes available. Sites with existing power supply are becoming more attractive.
With the rise in EV sales, warehouses need to accommodate EV charging. A majority transition to EVs could occur within the next decade, making current facility design crucial. Older facilities unable to support this change may become stranded assets. There has been a 40% increase in companies with net-zero commitments in the past year.
Solar costs have dropped by 40%, and owner-operators are more likely to adopt solar due to direct business benefits. However, some owners do not monitor their systems, leading to unnoticed malfunctions. Over-generation during the day is a concern for local grids, particularly in WA. Achieving a 6-star green rating can be time-consuming.
Location remains a key consideration for new warehouses, influenced by:
Meeting the diverse needs of businesses, including location, power, size, floor quality, and ESG requirements, is increasingly challenging. Integrating these needs with automation and ESG goals into a functional facility requires careful planning and expertise.
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