On March 20 2018 Amazon's market value increased by 2.7%, making it the world's second most valuable company. Only Apple is ahead of the internet giant in terms of market value, with Microsoft, Alphabet and Facebook all trailing behind. 

This growth spurt comes just months after Amazon announced its launch in Australia, where it has already reached 10,000 sellers. In fact, Marketplace Pulse expects it will reach 50,000 sellers by the end of the year.

This $763 billion company is changing the retail industry, creating huge challenges for traditional brick and mortar operators. Top brokerage firm Forsyth Barr has forecasted that Amazon will move to New Zealand in a matter of time. So, how could this growth in online retail affect commercial property?

Shopping online

Online shopping's market share is quickly increasing - and it could affect NZ's commercial property market.

How will online retail impact Kiwi Businesses in the future?

In 2018 consumers want quick, hassle-free service and cheap, transparent pricing. Online retailers like Amazon are at an advantage here thanks to their lower overheads, transactional service model and ability to operate sell and deliver internationally. That's why it's no surprise that online retail spending has increased by 13% during the year to January 2018, according to BNZ. 

Online retail still represents a relatively small portion of the retail market here, however, it's growing almost twice as fast as brick and mortar. As this growth increases three things are likely to happen:

  1. Large retailers will invest in warehouses and logistics operations to expand their capabilities and better compete in the online space.
  2. Brick and mortar retailers will focus more on providing shoppers with a customised experience in-store to push an advantage over e-commerce businesses.
  3. Brick and mortar retailers who are slow to adapt to changing consumer behaviour will lose market share. 

If the current rate of e-commerce growth increases, or even stays the same, its threat to traditional brick and mortar retailers will only intensify. Plus, with Amazon knocking on New Zealand's door, it's clear that the only way is up for online retail.

Industrial building

Demand will increase for large warehouses as New Zealand retailers focus on expanding their online footprints.

How could e-commerce growth affect commercial property?

Changes in the commercial property market are driven by changes in the way businesses operate, and how consumers spend. To that end, demand for industrial warehousing could see marked increases, as it's essential to fulfillment and the storage of back stock for online retailers.

There was 409,799sqm of industrial property available for sale all around New Zealand in late 2017, and 153,230sqm in Auckland alone, according to realestate.co.nz data. Assets such as these could experience sustained value increases as demand intensifies, especially in infill locations near large populations such as Auckland's central suburbs. These central locations are becoming increasingly important to online retailers striving for same or next day delivery. 

On the other hand there was 1.55 million sqm and 1.05 million sqm of industrial property available for lease in late 2017 in New Zealand and Auckland, respectively. The trends described above and the corresponding increases in demand could place upward pressure on industrial property rents, improving their investment returns and helping to decrease their (already low) vacancy rates. 

To make the most out of this fast-growing sector, smart commercial property investors must take time to consider what's in the future, and be quick to capitalise on opportunities. To start your search go to New Zealand’s number one property website, with the most commercial property listings - realestate.co.nz.

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