Power in numbers: 3PL operators drive efficiencies through business parks
Power in numbers: 3PL operators drive efficiencies through business parks
4 June 2015
Auckland, 4 June 2015 - Third Party Logistics (3PL) operators are increasingly drawn to the efficiencies and strategic advantages presented by high quality industrial business parks across the country.
Tim Boyle, Associate Director with CBRE New Zealand’s Industrial & Logistics Services teams, says the benefits of being part of a business park are immense for 3PL operators.
“There are very few parcels of land for standalone, A Grade developments, so not only are there fundamental supply issues for individual buildings, but there are also so many tangible business advantages and ‘pull factors’ drawing 3PL and manufacturing operators to business parks.”
Business park hot spots for 3PL
Mr Boyle says 3PL operators have limited options to develop their own sites: “There are high development costs if you try to go it alone, but with business parks you get the benefit of economies of scale and existing infrastructure.
“Auckland International Airport is leading the charge with its industrial land available for development, and as such, many logistics businesses are taking advantage of the AIAL’s access to air cargo.”
Mr Boyle says that the popularity of Wiri and the opportunities presented are significant: “Wiri is very much in the spotlight for 3PL operators. With its proximity and access to the rail network, we’re seeing a lot of interest. The proposed cross-docking facility being planned by The Ports of Auckland will become a huge draw card, not only to those within the site, but to operators in the surrounding area as well.
“It can be very tough for individual operators on standalone sites to get rail siding. Similarly, we’ve got clients very interested in how they can locate themselves closer to the inland ports – or at least, be on a route with clear and relatively quick access to the ports.”
Businesses looking for maximized efficiencies for trucks, access to rail and reduced costs are well-placed to consider locating to a business parks to secure those elements - and more.
CBRE’s recent industrial market research shows that the three most important transportation network improvements (recent or underway) for logistics companies are the SH20 Manukau extension, the Waterview motorway connection and the Wiri inland port rail link. Not surprisingly for logistics companies, the proximity to transportation networks is reported as one of the most important features of an industrial suburb.
Designed by logistics experts, for your benefit
Mr Boyle says that business parks have been designed by logistics experts, with the requirements of 3PL front and centre.
“Every need has been considered and the whole park will be designed around the way trucks move and how big they are, to the size of container yards and new lighting generating increased cubic efficiency. 3PL operators want for nothing in these parks.”
Mr Boyle says business parks feature clear spans, higher studs, the latest fire safety requirements, large yards, and cutting edge security technology. Another element that Boyle says is of tangible value to 3PL operators is a smaller office to warehouse ratio.
“As we know from our team’s industrial research, when it comes to building specific features, the number of columns and column spacing are among the most important features for logistics operators, while the size and to some extent the quality of the office component are the least important elements.”
That approach is changing the way new buildings are formatted: “Older, lower quality, B Grade logistics facilities often have a ratio of 30% office to 70% warehousing. With technology now leading to different, more efficient ways of working, that office component ratio has come down to 10% on average. Modern business parks reflect that shift, but older facilities are simply not designed for today’s operating practices.”
Amenity is on the up
Mr Boyle says business parks are well-set up with staff and guest amenities: “For 3PL businesses and manufacturers with a high staff head count, they want lunch rooms, cafes, restaurants, banks, gyms and shopping facilities onsite.
“As we’re seeing with ever-popular Highbrook and the Auckland Airport, on site amenities and accommodation are in high demand. For the AIAL in particular, the Novotel Hotel’s occupancy has been at near capacity since completion.
“The bottom line is that these business parks are very well thought out schemes and it shows. Decisions to locate within a business park are often made on a combination of wanting the amenity and servicing, strategic locations, and the cost savings and efficiencies that come with a relocation.”
Movers and shakers: emerging bright stars
Canterbury is a rising star with its business parks. Examples are Waterloo and Wigram Business Parks, which are well-designed locations offering the underlying security, rail and port access, business continuity and good land, that South Island-based 3PL operators’ desire.
Mr Boyle says, “In the North Island we are starting to see more of a focus on Pokeno, which is in large part due to the land shortage in Auckland. Occupiers are looking for efficiencies, and Pokeno is on the main trunk line to Hamilton, Tauranga and Auckland.”
Traditionally second tier locations are now viewed more favourably; “The premium business parks are filling up fast and so occupiers are having to look elsewhere. Everyone knows that increasing land values and land costs are becoming big factors alongside rising construction and labour costs.”
The question for 3PL operators, says Boyle, is where the best cubic efficiency and amenity can be found, for the best price.
Biggest pain points
Mr Boyle says that biggest pain point for 3PL operators is the struggle of having to build a facility on a standalone piece of land.
“It can be incredibly difficult, not to mention time consuming and expensive, to create efficiencies and economies of scale when you are putting a single building or facility on a block of standalone land. In some cases, half of the site itself gets taken up by roads and carparks and council coverage ratio restrictions.
“Why not get the advantage of roads and infrastructure already in place - without chewing up half of your site - with a communal car park in a strategically located, well-serviced business park?”
Laid out and wired for success
Mr Boyle says older sites haven’t been able to plan ahead like the more comprehensively planned business parks: “Whereas older industrial sites will often have staff parking in the yard, modern business parks offer separate areas for staff and guests, as well as partitioned areas for trucks, containers and forklifts.
“In addition, when it comes to power, business parks have huge power capacity available for tenants. In many cases power is pre-wired into sites, which can be hugely expensive to bring in from transformers on an ad hoc, one-off building basis.”
Build on advantage with efficiencies and competitive prices
Mr Boyle says that for 3PL companies looking to create efficiencies, business parks are the smart option.
“Business parks are well designed to accommodate the industrial user, and 3PL occupants are much more likely to get greater efficiencies at more competitive prices. There are many advantages of being part of a well-thought out park scheme, considerably more so than one off locations can offer. Our message to 3PL operators is that you should be considering business parks if you aren’t already doing so.
“It has been said before but it is worth reinforcing: allow plenty of time to consider your options when it comes to property. We recommend you allow at least 18-24 months before your current lease expiry to start looking at your next move. Don’t get caught with your back up against the wall with no leverage, no options and no premise to operate from. If you are within that time frame now, it is time to start engaging a property expert and planning for your next location.”
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2014 revenue). The Company has more than 52,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 370 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.