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New global supply chains create demand for different real estate facilities

3/1/2022
Designing and configuring supply chains to meet changing consumer demands has had a direct impact on demand for logistics and industrial real estate in Asia Pacific.

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We have seen the infill of last mile eCommerce networks where the demand for same day/next day delivery in large urban centres is driving demand for last mile logistics infrastructure. 

  • 51% of internet shoppers prefer same day delivery. 
  • 80% of shoppers want same-day shipping and 61% of these want 1-to-3-hour delivery from placing their order. 
  • 49% say same day makes them more likely to shop online. 

This is resulting in the rapid infill of last mile fulfilment networks and with that, demand for real estate. Clearly, submarkets in or near major metropolitan areas with large dense populations will be sought after, especially if these locations are well serviced by transport infrastructure to optimise efficiency of product movement from warehousing and distribution centres to last-mile fulfilment centres. As more retail shifts online, not only will this increasingly bring Tier 2 and Tier 3 cities into play, but at the real estate level there could be opportunities of repurposing at least parts of retail centres for fulfilment purposes to meet the needs of the catchment population. 

Given the limited availability of such sites and that last mile fulfilment costs are also rising, this points to the need for consolidation to build scale and drive efficiency with pure online fulfilment costs running as high as 25%, while multistore/omnichannel is around 10-20% and pure retail is nearer 2-9%. This is leading to investment by eCommerce platforms and omnichannel retailers in technology and picking automation to achieve the required speed as scale increases. Development of last mile transport models and technology and the use of predictive analytics to plan and flow inventory from vendors to consumers are also ways to reduce consumer order fulfilment times and costs.

Modern, prime logistics warehousing is in high demand to take advantage of warehouse automation to accelerate order fulfilment and space efficiency. The introduction of online grocery categories is leading to strong demand for cold storage space across multiple temperature ranges.

There will of course be increased demand for modern manufacturing and logistics facilities that address the need for speed and efficiency as well as built in sustainability features. Facility design from the operations out will become the norm taking account of capacities, processes, flows, automation and technology, followed by the building specification – not the other way around. 

The key decisions however will come down firstly to selecting the right location for manufacturing and logistics facilities to optimize speed to market, cost and return on capital and increasing impact on the environment. 

Download our paper – “The role of Asia Pacific in global supply chains”.

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