From warehouses to manufacturing – exploring the different types of industrial property

When the topic of industrial property comes up, it’s not uncommon for most people to picture a giant factory or warehouse in the middle of nowhere. The sector, however, has evolved rapidly, now encompassing many types of property spanning various purposes.

A brief history

The industrial revolution of the late 18^th century saw growth in steam power, iron production and mechanised processes. Coupled with improved methods of transportation, such as railroads and steam-powered vehicles, the developed world was able to mass produce goods for the first time, and also distribute goods more efficiently to different markets across the globe. A natural outcome of this revolution was the rise of factories, warehouses and other industrial facilities.

In the 200 or so years since, ongoing technological advancements spurred new types of industrial property, such as distribution and data centres.

Further, globalisation has required industrial properties to be placed in strategic locations and we see this through the manifestation of the ‘mega-warehouses’ and distribution clusters sprouting near major ports and transport hubs.

These hubs are vital to global supply chains, particularly with the rapid growth of e-commerce and the rising expectations of consumers in terms of same-day or overnight delivery. This has subsequently seen significant investment in automation and sustainability, which continues to shape the sector.

Industrial property types

Here, we have outlined common types of industrial property assets.

1. Warehouses

Warehouses, fulfilment and distribution centres are sometimes classified as their own, distinct type of industrial property. However, the lines are often blurred between each.

Warehouses

A traditional warehouse is what typically springs to mind when people think of industrial property. Warehouses are used primarily for the storage of products and materials.

Where the main purpose of a warehouse is purely the storage of goods, rather than distribution or fulfilment, location tends to be a secondary consideration for owners and occupiers.

Fulfilment centres

Where a warehouse acts as a fulfilment centre, they will typically be located close to cities or transportation hubs. A fulfilment centre handles goods from one or more companies, which are individually picked, packed and dispatched to a consumer off the back of an order.

For example, a warehouse is currently under construction for Amazon, which is set to become the largest in Australia. The four-level, 209,000 square metre (sqm) warehouse is slated to become a fulfilment centre for the online behemoth and is located just 23 kilometres north of the Melbourne CBD.

Distribution centres

A distribution centre is a specialised facility used for the storage and distribution of bulk goods. Distribution centres blur the lines between its own type of industrial property and being classified as warehouses, and it is common for these assets to be attributed to either category.

Distribution centres are similar to fulfilment centres, but primarily store and ship goods in bulk to a retailer or wholesaler, rather than a consumer.

When it comes to distribution centres, location is vital. These facilities are primarily located near transportation hubs, such as ports, airports or major highways. Transport logistic facilities can also be classified under distribution centres, wherein all activities relating to transport and logistics are carried out.

An example of a well-located industrial property is the May 2024 acquisition by the Trilogy Industrial Property Trust, which added an 18,800 sqm facility to its portfolio. The property is located in Brendale, Queensland’s premiere industrial precinct, and is fully leased to leading supplier of educational resources and toys, Modern Star. It sits 18 kilometres from the Brisbane CBD, with efficient access to Brisbane Airport and the Port of Brisbane, as well as the Bruce Highway, Gateway Arterial and M1 Pacific Motorway.

2. Manufacturing facilities

Although they have evolved, manufacturing facilities have long been the stalwart of the industrial property sector. Typically divided into two categories – light and heavy – manufacturing facilities do just that, manufacture or process goods or materials.

Light manufacturing

Light manufacturing facilities are properties used for making smaller, consumer-centric products, such as electronics and furniture. Products made in these facilities often do not tend to have laborious or complicated manufacturing processes or rely heavily on difficult to install, specialised equipment. This means the property does not require a high degree of tailoring to each tenant compared to heavy manufacturing facilities.

Heavy manufacturing

Heavy manufacturing involves the production of tailored heavy-duty goods and materials. Manufacturing large or heavy goods often requires highly specialised, difficult to install, heavy machinery, and facilities equipped with particularly large workspaces. As such, heavy manufacturing facilities are frequently designed to meet the specifications of the tenant and cannot be easily re-let without significant capital expenditure to refit or replace the asset.

For example, Austral Australia is a Western Australia-based ship building company. Their Fremantle facility sits on a 78,000 sqm parcel of land, which has four highly specialised building halls, the largest of which measures 99 metres long, 35 metres wide and 22 metres high.

3. Research and development facilities

Research and development facilities can also be included in manufacturing facilities, although they are often recognised as their own type of industrial property. These facilities require niche, highly specialised equipment, similar to heavy manufacturing, but with a smaller footprint.

The Therapeutic Goods Administration is responsible for regulating the supply, import, export, manufacturing and advertising of therapeutic goods. Their complex at Symonston in the ACT hosts a world-class laboratory facility, which is specialised to accommodate the testing and manufacturing needs of the Therapeutic Goods Administration.

4. Flex space

Flex buildings are designed to offer multiple uses to the tenant, ranging from retail showrooms, warehouse space, distribution and even office space. Flex space tends to have shorter leases and the least-tailored fit out.

5. Cold storage

Cold storage facilities are temperature-controlled warehouses designed to keep perishable goods at low temperatures. These facilities are essential for the food and pharmaceutical industries.

As these facilities are temperature-controlled around the clock, they tend to rely on significant amounts of power. It is estimated in a standard refrigerator warehouse that one square foot (0.09 square metres) of space uses up to 25 kilowatt hours per year.

For reference, the largest cold storage facility in the world is located at 2800 Polar Way in Richland, Washington in the United States. This facility totals 46,900 sqm of floorspace, meaning annual energy usage for refrigeration alone sits at around 12.6 million kilowatt hours.

6. Data centres

It is estimated that approximately 402 exabytes of data is created every day. For reference, one exabyte represents 1 billion gigabytes. This data needs to be stored somewhere, which requires data centres.

A data centre is a physical facility that organisations use to house their critical applications and their data.

While components may be similar across assets, there are a number of different data centre types. Their classification depends on whether the service one or many organisations, how they fit into the topology of other data centres, what technologies they use for computing and data storage, and even their energy efficiency.

Learn more about industrial property

In our report, ‘The time for industrial property is NOW’, we explain the fundamentals driving the growth of the industrial property sector. Discover why Trilogy Funds sees great investment potential in the sector, and what we look for when selecting a strong industrial asset.