E-com to benefit quality property

QUALITY industrial property will be the sector with the most to gain if electronic commerce does eventually make inroads into retailing in Australia according to the May Property Market Review by Macquarie Bank.

“With a focus on ‘just-in-time’ distribution, we believe there will be opportunities for the development of large, specialised high bay industrial buildings with state of the art inventory control systems,” the review said.

“Industrial locations near international airports, rail stations and road transport hubs should become even more highly valued.

“In terms of the retail property market, we would expect bricks and mortar retailing to remain by far the most popular form of shopping.

“Prime regional centres, well-located bulky goods outlets and infill neighbourhood centres should continue to outperform.

“But electronic commerce will accelerate the demise of retail centres in poor locations,” the review warned.

“Strategic location will take on a whole new meaning under an electronic commerce scenario.”

“The market base for online shopping will need to broaden before it has a substantial impact on traditional store-based retailers.

“Continued falls in the prices of computer and Internet hardware and software will help broaden the base of digital shoppers.”

The acceptance of online shopping is also being hampered by a number of problems, the review said.

“In the eyes of many potential customers, there is a wide gap between the promise of electronic commerce and the reality,” it said.

A recent survey by accounting firm Ernst & Young found that more than half of respondents were concerned about using their credit card on the Internet.

This compared to about 20 per cent in Canada and the US.

“The risk of credit card theft is a major problem holding back online shopping,” the review says.

“Another problem is the setting up of infrastructure to support online sales.

“For electronic commerce to work, operators need to have reliable and efficient infrastructure systems in place.

“Unlike other parts of the world, including the US and Japan, we do not have necessary systems in place to support ‘just-in-time’ door-to-door delivery of retail goods.

Take-up of online shopping in Australia is well behind the US and Europe with only 5 per cent of Australian adults making purchases over the Net in 1999, compared to 17 per cent in the US, 9 per cent of Canadians and 10 per cent of Britons.

According to Internet research company www.consult, online sales in Australia have been growing at a rate of up to 500 per cent a year.

In 1997, Australians spent $40 million on products over the Internet and this grew to nearly $1 billion last year.

This year, sales are forecast to reach $5 billion and $10 billion in the following year but these figures are still just a drop in the bucket compared with total retail sales.

“The biggest threat to property values will be that electronic commerce has the potential to disperse and decentralise retail and business activity,” the review said.

“By contrast, the value of property stems from the economy’s need to concentrate and centralise this activity.”

A survey by the Property Council found 54 per cent of respondents viewed electronic commerce as a threat to their property.

But Macquarie believes property owners need not be concerned just yet.

“In Australia, strong activity in the retail leasing market confirms that tenants are showing no signs of abandoning traditional bricks-and-mortar concepts,” the review said.

“And, while electronic commerce may eventually soften the returns from some property assets, there will also be big winners, particularly in the distribution-logistics sector.”

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