Development sites are big business. With an ever increasing demand for property in major capital cities on the east coast of Australia, developers have been widening their search for land, to less densely populated areas. These larger parcels of land are being snapped up by savvy property developers clutching an opportunity to create major residential developments. Great news for land owners with a lot of them capitalising on this by changing the zoning of their land to residential use.
Enter Amazon. One of the largest online retailers in the world. With their need for sites big enough to accommodate their operating facilities, property developers in the market for large parcels of land may face some competition.
Recently securing a site for their fulfilment centre in the south-east Melbourne suburb of Dandenong, Amazon have entered our competitive property arena. This is likely to be the first of many. If they expand their offering in Australia they will inevitably need to explore other locations for various large and small scale operations “in line with the company’s growth in Australia” says m3property. The future may see them scout for sites to satisfy their distribution and storage needs. Taking cues from their overseas presence, plants such as ‘prime now hubs’, ‘fresh food distribution centres’, ‘delivery centres’ and ‘regional sortation’ may be needed. These different facilities can be spread far and wide, with some requiring close proximity to major cities, to enable speedy delivery, while other larger operation centres can be based further afield. Of course, if all goes according to plan, this may attract more international companies looking to do the same, making competition for land even fiercer, therefore driving up the price.
The question everyone is asking is ‘what does this mean for the Australian property market?’ For one, demand for housing in areas surrounding the Amazon plant is likely to increase, as people favour housing close to employment opportunities. This increase in demand is likely to sprout into residential developments and lead to the creation of self sufficient communities spreading further from the traditional residential hubs.
We live in a country with increasing population, with demand for housing increasing, it will need to be built accordingly. The addition of Amazon into the property market will only enhance our need to create housing opportunities in previously untouched suburbs.
This could also have an impact on rental markets closer to the cities. Demand remains high at the moment because of the lack of options available. The creation of new suburbs will provide an alternative for people, possibly releasing pressure on the rental market in areas close to the city.
The development of infrastructure is another bonus. Although some may see increased traffic as a negative, it would force governments to look at current infrastructure and make improvements to be able to deal with an increased population. This may involve new public transport facilities, freeways and better roads to keep the flow between the new areas and the city. Along with this comes hospitals, schools and other community amenities. This will only make housing more attractive to buyers.
Another strategy that we are yet to experience in Australia is the self-checking trolley system. Amazon recently purchased the WholeFoods chain in the US to enable it to have a physical fresh food presence. Part of their business model is to introduce trolleys that scan and total the grocery purchases as the trolley is filled, doing away with the need for any checkout service at all. At present, the Australian general public are showing preference for a traditional supermarket shopping experience with less than 10% happy to purchase fresh food or fresh meat online. Coles and Woolworths are maintaining a leading margin of shoppers, with Aldi and IGA stores maintaining a substantial loyal following also. If Amazon manages to introduce this revolutionary shopping experience successfully, even if it means purchasing one of the existing chains, it could impact the property market dramatically. The demographic of residents around such stores will most likely convert to a younger age group, who are most likely to embrace this technology. In turn, this will require the type of housing to reflect this demographic to alter accordingly; probably to multi-unit developments suited to the rental or first home buyer market.
What changes will we see in the Real Estate market once the Amazon Fulfilment Centre is operational in Melbourne?
The introduction of Amazon can force us into creating infrastructure and housing in areas that may have been slow to grow. As well as the obvious creation of jobs, the conception of a successful network of infrastructure and housing will help people stay connected. The adage comes to mind, ‘build it and they will come’. It seems Amazon may be the driving force in forging a new path for regional housing prospects. Stay tuned.
DISCLAIMER – Alleura recommends each individual seek the services of a qualified service provider before undertaking any financial investment. The information provided here is for general information purposes only. It is not intended as financial or investment advice.