Are Multi-Storey Warehouses Finally Stacking up in Sydney?
Written by Nathan Cairney & Dominic Sorbara, TMX Global
Multi-storey warehouses have long been touted as a rising trend in Australia. Many FMCG and online retailers have multiple storeys in parts of their facilities to support sophisticated automated materials handling systems. Landlords are planning multi-storey warehouses capable of accommodating multiple tenancies across multiple storeys, to maximise the gross lettable area yielded from land parcels in constrained locations.
Right now, across the Sydney basin alone, there are more than a dozen public – many not yet public – multi-storey warehouse and distribution centres in various stages of planning and delivery.
The NSW Department of Planning & Environment’s website shows multiple planned and under construction multi-storey warehouses in Sydney alone.
Soaring land prices, record-low vacancy rates, limited supply of appropriately zoned land close to seaport and airport nodes, and population densities, are influencing development decision-making and sending warehouses skyward in South Sydney, although the trend stretches north to Macquarie Park and west to Blacktown.
During the past 18-24 months, as some of these developments were being planned, industrial rental growths skyrocketed. A perfect storm of soaring demand spurred by the intra and post-pandemic impacts to the sector, plus constrained supply and a bottlenecked planning system, has seen industrial rents growing 30-40% year-on-year.
Given this rise, how much farther can we expect to see these warehouses sprawl in location and occupier profile? Applications for multi-storey warehousing are cropping up southwest of Sydney as far as the M7 motorway.
As with any new trend, there are always a few who blaze the trail, and this is true with the three facilities under construction in South Sydney. Each of these facilities possess differing floor-to-floor heights, sizes of floor plates, ratios of office-to-warehouse space, approaches to carparking and connectivity to offices, and hardstand configurations and dimensions. The occupiers secured for these facilities span construction, manufacturing, third-party logistics, and online grocery, and the tenancies range from 2,000-8,000 sq m.
Only time will be the judge of which is most successful and appropriate to the local market, and this first wave may lead the market long-term – or could be an example of what-not-to-do for the next wave, who may pivot before breaking ground on the second wave of multi-storey warehousing.
Some key lessons can already be learned. Gone are the days that the concept design prior to DA consists of a few architectural, civil, and landscape plans and “the builder can do the rest”. A multi-disciplinary design team should be engaged much earlier than they would on be on a single-storey warehouse. Detailed design coordination between architectural, structural, civil, mechanical, fire engineer, and BCA consultant is paramount.
Ramp gradients, heavy vehicle access, and hardstand configuration, along with the user mix and how each of these will be viewed by users, must be worked through in early planning and design. Capital investment value estimates on recently submitted applications suggest there is a scale of economy available on site yielding circa 40,000m²+ of GLA that isn’t represented in the sub-20,000m² GLA sites. This will be an interesting factor to monitor as more of these facilities convert from planning to construction, and local contractors become more experienced with these warehouses.
The Australian market’s concentration on “last-mile logistics” and the surge in e-commerce are also chief drivers of the multi-storey warehouse boom. Last-mile logistics, or last-mile delivery, is often the largest portion of overall logistics costs. And it is this aspect that the planned developments are banking on to justify occupiers paying higher rents to be near major transport hubs, or their own last-mile local delivery catchments to optimise delivery to their customers.
More and more multi-storey warehouses will shoot up in the coming years, and they will be the right logistics choice for many businesses. But despite this surge, every business must ensure their site procurement is given careful upfront evaluation, understanding the potential trade-offs between functionality and location. It is only with this crucial first step that a business can be confident in making the best long-term commercial and operational decision for its supply chain.