Don’t underestimate Amazon’s power: researcher

Amazon is set to shake up Australia’s retail industry.

The impact of US-based e-commerce giant Amazon in Australia should not be underestimated, despite some local commentators warning of challenges such as higher local costs and a geographically dispersed Australian population. 

That’s the view of Anne Breen, head of real estate research and strategy at Edinburgh-based asset manager Standard Life Investments, which has £277.9 billion ($484.1bn) under management.

Even though British cities are more modest in size outside London, Amazon’s entrance had already been “transformational” across both retail and real estate, driving growth in industrial rents, Breen says.

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“Typically industrial and warehouses have been quite a bit higher-yielding than retail and offices for the nature of the supply factors, and typically they don’t deliver the same growth in rents,” Breen told The Australian while visiting Melbourne.

“But actually what we’ve seen in the UK is that there’s very little to no yield differential now between distribution warehouses and offices and retail, and that’s because it’s the area of the market where we’re seeing the strongest rental growth.”

A lack of development activity had been driving rental increases, with developers hesitant to create new facilities before securing tenants, she says.

Amazon and other related third-party logistics operators are taking up about a third of all new supply in Britain.

The broader effect on regional British markets has been similar, despite the lower population density outside the capital.

She also notes the swift technological advances of Amazon and other companies in terms of delivery with a number of groups trialling the use of drones to distribute purchases to shoppers quickly.

After previously spending substantial time researching the growth of eCommerce in 2000, Breen notes the more modest increase in the online shopping trend in the decade to 2010, followed by the sharper transformation after smartphones became widespread.

This article originally appeared on www.theaustralian.com.au/property.