Industrial property response

Acknowledging that technology can become obsolete and superseded very quickly, Campbell says high levels of flexibility are being woven into industrial properties to avoid them becoming effectively “stranded” as the game changes around them.

“We’re seeing demand for heavier floor loadings and higher stud heights to accommodate more sophisticated racking systems and specialised machinery that needs to be bolted down. To remain relevant in the marketplace, businesses will need to be more visionary and the big names in the market are definitely playing the long game.

“Cardinal, the leading third-party logistics (3PL) provider in the fastmoving consumer goods sector, has the country’s first fully-automated, ‘always on’ 3PL facility in Drury, believed to be the largest of its type in the southern hemisphere. It’s a great example of the way things are heading in the logistics’ property market.”

Other evolving segments of the industrial market according to Campbell are further growth in the country’s data centre sector given digital transformation, the need for data sovereignty, and our world-leading renewable energy capacity, and a more sophisticated and better integrated cold chain logistics sector.

“Also expect potential uptake of automated vertical farm production enterprises, where vegetables are grown in temperature and light-controlled warehouses which would contribute to the country’s food security.”

Campbell says aside from technological advances that transform business operations, innovation that supports best-in-class sustainability and social responsibility is also high on corporate, stakeholder and developer agendas.

“These ESG initiatives are traceable, trackable and able to be benchmarked, with solar panels, water re-use, and efficient ventilation and lighting all contributing to improved operational bottom lines over time.

“Realistically, there’s not a lot more that can be incorporated on the sustainability side when we’re talking about industrial,” says Campbell.

Proactive developer

Argosy Property, the NZX-listed and top 50 entity by market capitalisation, has a diverse portfolio of 50 properties worth over $2 billion across industrial, office and large-format retail, and a “green” portfolio worth $675 million.

Head of development, Marilyn Storey says Argosy intends to grow the industrial component of the portfolio and green this up.

“Argosy’s current industrial weighting is 51 percent and growth within our industrial development pipeline will increase this to over 60 percent, with the company target set between 60-70 percent.

“We’ve also mandated to have over 50 percent of our portfolio assets green-rated by 2031, with these developments targeting 6-Green Star ratings and low-operating carbon through the use of solar.”

With stakeholders championing ESG mandates, Storey says most of the offshore occupier enquiry has a sustainability requirement.

“In the sustainable space, New Zealand would be on par with Australia and Europe. The design quality of our buildings is excellent as we are delivering clear-span, seismically resilient buildings and incorporating climate adaptation into our design.

“We have an advantage in New Zealand with operating carbon, as our electricity grid produces a large amount of electricity from renewable energy sources.

“Our aim is to deliver a quality product driven by Green Star requirements to reduce environmental impact and improve building efficiency, while meeting occupier requirements for vibrant working spaces for their staff.”

Technology and AI are reshaping how buildings are designed, with Storey saying automation, robotics and layout optimisation all contribute to the efficient use of a warehouse and reduce operational costs.

“We’re constructing warehouses that future-proof space flexibility for occupiers. We maximise the height to the knee, make them column-free wherever possible to optimise capacity, increase floor loadings, and ensure there’s truck articulation around the site for efficiency.”

On a 3.5ha site in Neilson Street, Onehunga, Argosy’s largest industrial build to-date is underway. The $100 million-plus complex targets the 6-Green Star Design and As-Built rating, a world leading sustainability standard.

This development comprises two high, clear-span warehouses up to 13m in knee height – one 5,000sqm, the second 11,500sqm, along with 3,400sqm of breezeway. It incorporates low-carbon concrete, rainwater harvesting, solar electricity generation via one of the country’s largest rooftop photovoltaic installations, smart lighting and air conditioning, and other green initiatives.

Similarly, Argosy’s Mt Richmond development in Mt Wellington on two contiguous sites totalling 10.64ha, is targeting a 6 Green Star rating across the project’s six warehouses. While watching global trends, Storey says vertical warehousing is not currently on Argosy’s agenda, although its pipeline could flex and pivot should demand arise.

“The lack of strategically located land and escalating rental rates are driving vertical warehousing in overseas markets. It’s more complex to build multi-level industrial property in New Zealand given seismic thresholds, and it’s not suitable for all tenants, but in time we could see vertical warehousing here.”

International radar

Bayleys’ global real estate partner Knight Frank identifies the importance of logistics facilities close to built up urban areas for last-mile delivery efficiencies to meet consumer demand for same-day or next-day delivery, as a major driver in the Asia-Pacific industrial market.

The higher cost of land in tightly constrained urban locations translates to higher rents, so vertical warehousing is emerging to make a facility more productive and to offset land and construction costs in places like Hong Kong, Singapore, and Japan, as well as in some port cities in Europe.

Across the Tasman, Knight Frank’s national head of industrial logistics, James Templeton says vertical/multideck warehousing has been talked about for some time in Australia, however, it is only practical in certain very limited situations.

“Sydney is probably the only city in Australia with real land constraint issues given the local geography which limits growth in several directions. so multi-deck warehousing could be viable there.”

Templeton says more important for industrial property is the ESG story, which until now was most widely associated with the office sector. “ESG-related design and strategy is being embedded into high-end developments to enable access to green capital, to help reduce operating costs, and to attract and retain quality tenants.”