“It’s a common mistake if we think e-commerce will only be in large regional distribution warehouses on the outskirts of town,” said Propertylink’s chief executive, Stuart Dawes.
“Everyone thinks these online retailers are going to take big, supersheds where they can distribute everything, and there is no doubt that these retailers do have these, but they have more located in the more traditional infill locations, close to the residential areas.” This is the area that Propertylink is focussed on; Propertylink’s portfolio has been built to ensure exposure to these areas.
He added that so far the vast swathe of foreign capital that has been coming to Australia has steered clear of the infill locations because it doesn’t want to take on the re-leasing risk that is typically comes from those areas. This has meant that it is largely left to the local specialists to seek out these opportunities and use the local on-ground teams to drive strong returns from the assets. For Propertylink, its team of more than 40 people has been able to achieve in excess of 80 percent retention of tenants each year for the past 3 years, according to Dawes.
Yet, online retailers require infill locations because they are now promising delivery in a set number of hours, and in order for them to meet that requirement good cannot sit in the supersheds which typically sit on the outskirts of towns.
An example of this, according to Dawes, is when the Sydney-listed real estate investment manager bagged an industrial complex in the western Sydney suburb of Yennora in a A$46.6 million ($35 million; €33 million) play with a new seven-year lease with online fashion retailer The Iconic.
“They [The Iconic] didn’t go for a warehouse on the edge of town, they have gone for a warehouse which is very much in the traditional logistics location. They have chosen that warehouse because the want it to be close to the residential areas so they can be close to their customers and reach them quickly,” said Dawes.
The opportunity should also continue well beyond 2017, according to Dawes, as online sales in Australia growing by about 12 percent to 15 percent per annum in recent years.
Australia has been a slower adopter of e-commerce compared to the US and Europe, however it is catching up fast.