New property types for investors

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With online retailer Amazon.com set to open its doors in Australia later this year, the country could see the emergence of new property types for investors – namely smaller “last touch” distribution centres and modern fulfilment centres.

According to Stephen Hayes, head of global property securities at Colonial First State Global Asset Management (CFSGAM), the growth of e-tailing and omni-channel retailing has been a major driver of the increased demand for logistics distribution centres around the globe.  

“With the growth in e-tailing and the problem of the ‘last-mile’ logistics, demand for smaller ‘last touch’ distribution centres is growing rapidly,” he said. “Given the lack of available land and zoning constraints, these buildings are typically not purpose built. Located in urban infill locations in major cities, they are older buildings that have to be refurbished and adapted for the distribution of goods, which is far from ideal.”

Modern fulfilment centres, in contrast, are large distribution and logistics warehouses. “They are typically located on the outskirts of cities, where large tracts of land are available near major arterial roads. The centres usually specialise in either combined or specialised small and large parcel sorting, or large parcel non-sortable centres. Small parcel sorting centres can ship up to 15 million items per annum.”

Modern fulfilment centres and last touch distribution centres are not that prevalent in Australia, as the share of the e-tailing market is lower than in other countries. “However, we do expect them to become more common in the major Australian cities as the market share grows. We don’t know what the future worth is,” Hayes said.

Investors can access these “profitable pockets of the property market” through listed property securities. “The listed property securities are typically the largest land lords in their markets. They are an excellent and efficient way to get exposure to some of the world’s best property assets.”

Hayes said there weren’t many downsides associated with investing in these property types. “There are not many pitfalls; the major one being they are traded on stock exchanges so can experience short term price volatility when we see large moves in stock markets.”

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