Rush to e-commerce ramps up demand for warehouses

Covid-driven rush to e-commerce ramps up demand for large warehouse premises

New Zealand businesses adapting to trading in the Covid-19 environment are ramping up demand for bulk storage and distribution facilities for e-commerce - as two of the largest industrial warehouses in Marlborough have been put on the market for lease.

As New Zealand moves to Covid-19 alert level three, social-distancing requirements are forcing retailers and foodservice operators to convert rapidly to contactless sales methods – such as online purchases, deliveries, and click-and-collect models.

National industrial director for Bayleys Real Estate, Scott Campbell, said this rapid move to new business models had led to a surge in already-strong demand for industrial warehousing, storage space, and distribution facilities to support new customer-fulfilment models.

“The move from level four to level three is a major step-change. Businesses still can’t sell face-to-face at physical retail premises, but the way is now open for potentially any retailer to accept and ship online orders,” said Mr Campbell.

“We’ve had numerous enquiries from retailers seeking space to fulfill new e-commerce demand – particularly in FMCG and homeware. This comes on the back of a big upswing in e-commerce activity from supermarkets and others operating as ‘essential services’ under level four.”

While some large retail chains were able to use dormant stores as temporary distribution centres, others were on the search for new industrial premises, Mr Campbell said.

“This is further ramping up demand for limited industrial space – particularly in locations with ready access to arterial transport routes, close to population centres and customer catchments.”

With the prospect that social-distancing requirements will prevent or limit in-store sales for a lengthy period, Covid-19 was acting as a lightning rod accelerating the existing trend towards e-commerce, said Mr Campbell.

“Retailers and consumers are quickly starting to see online sales as their go-to – and this change will outlast the pandemic. Covid-19 has simply brought forward a transformation that was going to happen over the next five to 10 years. The accelerated rise of e-commerce will add further to the demand and long-term attractiveness of industrial real estate.”

Mr Campbell’s analysis comes as two large-scale industrial warehouses have been placed on the market for lease in Blenheim’s Cloudy Bay Business Park. Both were tenanted until recently by a wine-bottling and warehousing company which has since consolidated operations at a new facility.

The two properties, adjacent to State Highway 1 in Blenheim’s Riverlands area, are now being separately marketed for lease by Bayleys Marlborough. Offers to purchase will also considered.

Salesperson Grant Baxter said the first vacant property - at 3 Seafair Close - was originally built for the Waitaki Freezing Company, which later became PPCS Freezing Works.

The original premises were constructed in the 1980s, with improvements in 2004 and further additions in 2005. Its most recent tenant paid annual net rent of $427,000 plus outgoings and GST per annum – equating to approximately $75 per square metre.

“The property consists of two warehouses with a total floorspace of some 6,325 square metres on approximately 7,747 square metres of freehold land,” said Mr Baxter.

“The property now comprises the original 3,700-square metre warehouse and a newer warehouse of 2,181 square metres – and incorporates an office, staff amenities, a laboratory, and mezzanine storage. External improvements include a canopy and 1,744-square metre yard, with excellent truck and trailer access alongside the building and multiple car parks.”

Mr Baxter said the structures were built on concrete foundations with timber and steel framing, concrete pillar and tilt-slab exterior cladding and a Colorsteel roof. They were fitted throughout with an interior security system.

The high-stud and clear-span construction provided flexible and versatile warehousing, he said.

The second large vacant industrial warehouse for lease - a short distance away at 17 Cloudy Bay Drive - comprises a 5,638-square metre building on a 12,497-square metre freehold site.

“This is another empty modern, clear-span warehouse with a high stud, with canopies and ample parking. This site has excellent truck and trailer access and is some 10 kilometres from Blenheim’s central business district. Under its previous leasing arrangement, the property was generating annual net rental income of $560,000 plus outgoings and GST per annum,” said Mr Baxter.

Mr Baxter said both of the properties at Cloudy Bay Business Park were being marketed for lease. While both are vacant offers to purchase may also be considered.

Both of the properties are zoned Industrial Two in the Wairau Awatere Resource Management Plan - a zoning which allows for a range of activities including heavier multi-use industrial and light manufacturing. Mr Baxter said neighbouring businesses included the Talleys and Springbrook food companies, wine producers Babich and Indevin, and Crown Sheetmetal.

“These two large industrial warehouses in a well-established business park offer an opportunity for a range of activities – including wine production, bulk storage, freight distribution, manufacturing, food processing and trade supplies,” said Mr Baxter.

“Very few warehouses of this size and quality are available in Blenheim – a link city between the North and South Island. Their availability now coincides with the coronavirus-driven rush to e-commerce – and this will only serve to widen the opportunities that come with substantial storage, warehousing or freight distribution capacity.”

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