High-tech industrial park takes off at Essendon airport

The airport is owned by the federal government, but its buildings and the land surrounding the runways are controlled by trucking magnate Lindsay Fox and property developer Max Beck under a long 99-year lease.

Over the past two decades, the airport’s surrounds have morphed from a set of dilapidated aircraft hangars and historic terminal building into a bustling shopping centre, a large car sales precinct, several suburban office blocks and a Hyatt Place hotel.

The airport has fully functioning runways primarily used by charter operators and emergency services aircraft.

Pihan said the new industrial precinct is part of the airport’s masterplan and is targeting logistics and high-tech industrial firms that are facing a lack of warehousing options, tight vacancy rates and rising rents, particularly in city-centric locations.

Two warehouses are already established in the park’s new Hart precinct.

Insurer Suncorp has a purpose-built 1800 square metre vehicle assessment centre and Elenium Automation is manufacturing its automated airport baggage handling and check in systems in a neighbouring warehouse.

Christine Miller, head of supply chain advisory at CBRE, said Australia lagged Canada and the US in cost-effective and fast delivery of last-mile packages.

Local business wanting last-mile services face twin challenges of dispersed population and high costs. “You need scale and density to do that [last-mile] otherwise your costs are going to kill you,” Miller said.

The cost of the final leg of parcel and package delivery from the warehouse to home – effectively the “last-mile” – is about 28 per cent of the total cost of transporting goods to consumers, she said.

Service providers, like Australia Post and FedEx, are raising fees by up to 4.5 per cent and changing parcel weight thresholds which, added to rising fuel costs, are likely to increase last-mile delivery costs by 9 to 13 per cent this year.

Miller said it was challenging for the sector to find key sites within a 20-minute drive of a significant proportion of greater Melbourne’s population.

Apart from Amazon, which is establishing its own delivery network, most businesses can’t afford to run dedicated last-mile centres and instead use parcel and post services to deliver to their customers.

“The challenge for retailers is that consumers keep switching back and forth between going to the store and ordering online. Retailers need to cater for both, which adds complexity in their supply chain,” she said.

Pihan said the new industrial precinct will have an end value of $500 million, adding a significant proportion to Essendon Field’s current $1.2 billion valuation.

The business park is also considering complementing a successful DFO retail complex on another 10 hectare portion of the airport targeting alternative retail categories like aftermarket auto, baby, pet, outdoor and adventure.

It also has plans in the wings for three more office towers, but will not speculatively build any in the current market. “We’re reluctant to go and spec an office building because there are vacancy issues in the city. We will see how those changes in working patterns stabilise over the next couple of years,” Pihan said.

The business park is seeking to further delay a community consultation process about its 2019 draft master plan – already submitted to the government – because of changes at nearby Melbourne Airport to its third runway, which will impact on flights and noise at Essendon’s runways.