7 things to consider when choosing a warehouse location

When it comes to optimising your supply chain and logistics operation, selecting the right warehouse location is a critical decision. It's not just about finding a convenient spot, it's about optimizing your supply chain, reducing costs, and enhancing efficiency. The right location empowers businesses with effective storage and distribution capabilities and provides an upper hand in a competitive market.

Understanding the primary purpose of the warehouse and the type of product to be stored in it are key considerations for location and proximity. If the primary purpose of the warehouse is to pick, pack and despatch customer orders, proximity to urban centres and residential areas is paramount. If the warehouse will primarily be used for longer-term storage or to store and deliver bulk orders to other warehouses, then urban centre proximity may be less critical and rental price savings could be had by being further away.

Regardless of the size of your business, selecting the right warehouse location is crucial for optimising operations and minimising costs. Here are seven other key considerations to keep in mind when choosing a warehouse location, to ensure seamless supply chain management:

1 - Proximity to major markets

One of the primary considerations is the proximity of the warehouse to major markets and distribution centres. Understanding your target market and customer base is essential for selecting an optimal warehouse location. Analyse demand patterns, population density, and demographic trends to determine the ideal proximity to your customers.

Australia's major cities, such as Sydney, Melbourne, Brisbane, Perth, and Adelaide, serve as economic hubs with significant consumer populations. Opting for a warehouse location near these urban centres can help minimise transportation costs and reduce lead times, ensuring the timely delivery of goods to customers.

Being closer to your target market reduces delivery times, shipping costs, and environmental impact, while also facilitating quicker responses to market fluctuations.

2 - Transport infrastructure

Accessibility to transportation infrastructure, such as highways, ports, airports, and railroads, significantly impacts distribution efficiency. Assess the availability and quality of road, rail, air and coastal shipping transport connections near potential warehouse sites.

Opting for a location with easy access to multiple modes of transportation can streamline the movement of goods, facilitate efficient supply chain management, and reduce transportation costs, ultimately enhancing customer satisfaction.

3 - Labor availability and costs

Labour is the backbone of warehouse operations. Consider the availability of skilled labour in the area you are considering for your warehouse. Evaluate the local labour market, including the available workforce size, skill sets, and wage rates. Balancing labour costs with workforce capabilities is essential to maintain operational efficiency and control labour-related expenses, and can contribute to long-term operational effectiveness and cost savings.

4 - Regulatory environment

Compliance with local regulations and laws is crucial when operating a warehouse in Australia. Familiarise yourself with zoning regulations, environmental requirements, building codes, and safety standards that may impact warehouse operations. Additionally, consider any specific industry regulations that may apply to your business. Ensuring legal compliance from the outset will prevent costly disruptions or penalties down the line. Engage with local authorities, legal representatives, and industrial property experts to navigate regulatory requirements effectively.

5 - Proximity to suppliers

If your business relies on a robust supply chain, it's important to consider the proximity of potential warehouse locations to your supplier network. Having suppliers in close proximity can reduce lead times, enable just-in-time inventory management, and minimise transportation costs associated with inbound shipments.

Assess your current supplier network and the availability of reliable suppliers in the area and the potential for establishing strong new partnerships.

6 - Real estate costs

Real estate costs constitute a large portion of your warehouse operating costs and can significantly impact your overall warehousing expenses. Evaluate property prices, lease rates, and taxes in potential locations to ensure affordability and long-term sustainability. Factor in the availability of suitable warehouse spaces that meet your size, layout and operating requirements without compromising on budget constraints.

The method of occupying the warehouse (ownership, leasing, or subleasing) can influence the other factors to consider when choosing a warehouse location. Occupying a warehouse typically involves the following methods:

Ownership

• Long-term commitment: Owning a warehouse implies a long-term commitment to a location. Therefore, thorough analysis is necessary to ensure the chosen location aligns with long-term business strategies and growth projections.
• Investment opportunities: Purchasing a warehouse provides opportunities for investment appreciation and potential tax benefits. Therefore, factors such as property value trends, economic stability, and growth potential of the area become crucial.
• Control over location: Ownership offers complete control over the warehouse location, enabling customisation and optimisation of the facility to meet specific business needs.

Leasing

• Flexibility: Leasing offers greater flexibility compared to ownership, allowing businesses to adapt to changing market conditions, operational needs, and customer demands. As a result, businesses can choose locations that offer strategic advantages, such as proximity to transportation networks or target markets.
• Cost considerations: Lease rates, utility costs, and taxes vary depending on the location. Businesses must evaluate these factors against their budget and operational requirements to ensure the chosen location is cost-effective.
• Lease terms and conditions: Understanding the terms and conditions of the lease agreement is crucial. Factors such as lease duration, renewal options, and potential rent escalations can impact the suitability of the location for long-term operations.

Subleasing

• Cost savings: Subleasing allows businesses to access warehouse space at potentially lower costs compared to leasing directly from the property owner. Businesses can negotiate favorable sublease terms, reducing overhead expenses.
• Location alignment: The location offered through subleasing should align with the business's operational needs and strategic objectives. Factors such as proximity to suppliers, customers, and transportation infrastructure remain important considerations.
• Legal and contractual considerations: Subleasing arrangements are subject to the terms and conditions of the primary lease agreement. Businesses must ensure compliance with all legal and contractual obligations, including obtaining necessary permissions from the property owner and adhering to sublease terms.

Evaluate the costs and benefits of each method for occupying warehouse space in different regions of Australia. Factors such as property prices, land prices, lease rates, property taxes, and utility costs should be carefully analysed. Balancing real estate costs with the other factors mentioned here is crucial for maintaining profitability and optimising your supply chain.

7 - Resilience and risk management

Consider the potential risks and vulnerabilities associated with a specific warehouse location. Australia is prone to various natural disasters, including cyclones, floods, and bushfires. Assess the site's exposure to these risks and the availability of contingency plans, insurance options, and infrastructure resilience. It's important to have strategies in place to mitigate and recover from potential disruptions that may impact your warehouse operations.

It's also important to anticipate future growth and scalability when choosing a warehouse location. Assess the availability of additional space for expansion or the flexibility to adjust lease terms to accommodate changing business requirements. A strategic location that offers room for growth and adaptability to evolving market conditions provides a competitive advantage in the long run.

Why does the location of a warehouse for a business in Australia matter?

The importance of location for Australian warehouses cannot be overstated. Australia's vast size, diverse geography, and dispersed population present unique challenges and opportunities for businesses operating within the country.

Optimal warehouse location plays a pivotal role in achieving efficient supply chain management, reducing transportation costs, and meeting customer demand in a timely manner. By considering these seven key considerations, businesses can make informed decisions that optimize logistics efficiency, reduce costs, and enhance customer satisfaction. A well-chosen warehouse location lays the foundation for a resilient and agile supply chain, enabling businesses to thrive in today's dynamic marketplace. Ultimately, selecting the ideal warehouse location is a strategic investment that can drive long-term success.

Warehouse rent: a roundup of the current scenario

According to JLL's Australian Logistics and Industrial Market overview for Q4 2023, industrial rental prices are continuing to trend upwards across Australia.

"Apart from Perth, average net face rents in every Australia market increased Q-on-Q in Q4 2023. The supply / demand mismatch and the ongoing challenges for businesses seeking modern, efficient warehouse space is still placing upwards pressure on asking rents."

For an in-depth insight, get your copy of the JLL report here.

uTenant is here to help you find the right warehouse

Selecting the right warehouse location in Australia requires a comprehensive analysis of several key factors. When finding the ideal warehouse location in Australia, uTenant is your trusted partner.

With its extensive network of warehouse listings and deep industry expertise, uTenant provides businesses with a comprehensive platform and network to connect with property owners and make informed decisions.

Whether you are seeking warehouse space in Sydney, Melbourne, Brisbane, Perth, or Adelaide, or even New Zealand, uTenant offers a user-friendly platform that simplifies the search process and facilitates efficient negotiations. Our experts here are ready to assist you in finding the perfect warehouse location that aligns with your business goals.

Don't miss out on the opportunity to optimise your supply chain operations and establish a strong presence in the Australian market with uTenant as your go-to resource for warehouse location solutions.

Reach out to one of us at uTenant today to explore our extensive database of warehouse listings, tailored to meet your specific requirements.

Updated: 15 February 2024