On-demand warehousing on the rise

We’re familiar with the office co-working model where individuals or businesses lease flexible space within a dedicated co-working hub – and now, that philosophy is crossing over into the industrial property sector in New Zealand.

Bayleys’ national director industrial and logistics, Scott Campbell, said co-warehousing is a rising trend globally and has been fast-tracked by the pandemic.

“Growing ecommerce transactions, changing customer demands, higher expectations around product availability and fulfilment times, and a squeeze on last mile delivery space – are all impacting warehousing needs.

“Small to medium-sized businesses with evolving business and space demands often can’t afford to set up a warehouse, and even if they could – a shortage of industrial land for new developments and low vacancy rates being seen in the industrial market, mean warehouse space is at a premium.”

Campbell said co-warehousing is starting to appear in the Auckland market in areas like Penrose and East Tamaki and he expects it to spread throughout the region as tenant occupiers find themselves with fluctuating space requirements in a tightly-contested market.

“The well-established and well-connected industrial precincts are prime contenders for offering co-warehousing and scalable logistics models and could optimally assist businesses with their last mile fulfilment functions.

“So many businesses have seasonal fluctuations in demand and fulfilment, or changing needs based on scale and it makes sense for landlords and occupiers to have flexibility around warehousing storage needs.

“Many businesses don’t want to get locked into rigid warehouse lease agreements that have no wiggle room for times of lower requirement for storage space, and these occupiers are looking for solution-driven efficiencies that flex with their operational demands.”

Campbell said co-warehousing arrangements tend to be based on gross cost leases, formulated on a case-by-case basis.

“Leases will be structured to reflect the uptake of value-add services and shared facilities like loading docks, office space, or IT infrastructure along with racking requirements and pallet capacity.

“Space is a moving target and efficiencies are all-important so, with the sharing economy gaining wider traction across every aspect of business today, co-warehousing is a natural progression in service provision.”

Overseas, emerging co-warehousing companies are employing sophisticated technologies to market and fill excess warehouse space, and they’re delivering customisable service options for occupiers.

On-demand warehousing is particularly relevant today where supply chain disruption and subsequent uncertainty over maintaining inventory levels is impacting business models and profitability.

“Occupiers who are dealing with uncertainties in supply chains, start-ups testing the market, or those businesses who have pivoted their operational model, don’t want to be locked into leases where they are paying for the use of an entire building when they only need a limited amount of space,” Campbell said.

Internationally, vacant or underutilised space within shopping malls and retail strips, and other real estate strategically-positioned near high-density consumer populations, is being seconded for warehousing functions.

This trend may also play out in the New Zealand market as traditional big shed warehouse availability continues to be squeezed.

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