Truck Storage: a looming future-investment?
Disruption is coming to a freight company near you with the electrification of trucking fleets
Demand for storage space because of the online spending boom has re-calibrated just about everything in the metropolitan industrial land and building industry. Industrial rentals have surged along with property & building prices as developers supply property for the booming warehouse direct sales.
For owners, investors and developers wanting to participate in this industrial surge, its probably getting a little late in the cycle to still produce reasonable returns from creating a land and building solution from a standing start. Particularly now that we are seeing increases in building supplies along with shortages of materials, making construction costs, just that little bit more unreliable.
Now that we know that online sales are here to stay, I have been looking at other opportunities which may emerge from this dramatic shift, with a view to providing our clients with a recommendation of how else we can take advantage of this shift and simultaneously still provide a reasonable return for the investment.
A metaphor could be that this on-line surge will create other waves that perhaps we haven’t thought of, that we can get in early and take advantage of, in the same way as what has occurred within the industrial property market over the last 2 years or perhaps the self-storage industry 30 years ago
Firstly, I think it is worth showing the growth on online sales over the last few years produced by ABS. Whilst there are no guarantees in life, its hard to imagine that online sales will ever retract and is here to stay.
One of the industries, to surf the wave of online sales is the road freight Industry. Along with warehousing, road freight has also been supercharged with the move to online. And when you think of it, the ultimate delivery to the destination from large transportation infrastructure modes such as Rail, Air, or shipping is via truck, small or large. In other words, all roads lead to freight transport, pardon the pun. Anyway, I thought I would find some statistics in order to confirm what I suspected
Pleasingly, I found this chart below, also by ABS. In particular it is worth noting the increase in registration on light, and articulated trucks. New truck registrations in particular have zoomed, with one category up 6% since last year. If this is just another one of the waves created by the on-line revolution, what can we as investors, developer and owners do in order to embrace this industry change.?
Firstly, let’s say from the outset, that road freight is a solid dependable industry. Just like the industrial real estate sector ie we can be confident that whatever we supply to this industry, provided of course we get the business proposition right, we could potentially earn a permanent income for a very long time to come.
Trucks are becoming obsolete and electrification of trucks will soon be common. I see a perfect opportunity evolving for property people to facilitate the parking and storage of trucks. Whilst I couldn’t find ABS data on the the ageing details of trucks specifically, I did find the above, which gave the average age of all vehicles at 10.6 years.
According to my searches the typical average useful life of a pickup truck is 7-10 years. This to me presents an opportunity for future demand. In addition to this, and is big one, electrification of trucks is here right now. Its only a matter of time, until this will create a total cost reduction across the industry and will bring forward the retirement of carbon engine trucks.. So, I think that the retirement of trucks will be a lot earlier than the 7-10 circled above.
Anyway, like the above, truck storage can be simply on a greenfield for lowly prepared ground and will produce rental of $100 per week per unit. With low levels of security are required. Above is a business in western Melbourne. In my initial view, looks that they are already running at high occupany.
Truck storage and parking offer a terrific business opportunity in that the rental income will be fractionalised over numerous rent payers. Also, capital costs of security are fairly modest and the scalability of the business is limited by the land size. And just today, i noticed an article relating to the electrification of trucks from the industry body which is referenced below.
If you would like to see what we have available in sites for truck storage, simply click through our future-investments page to see sites available here
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