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In the not too distant future, getting a pizza delivered might mean a drone flies it to you.
This would have been unthinkable even a decade ago, but aviation regulators have approved commercial drone trials in places like Japan and Australia. After getting the green light in April this year, Google’s parent company Alphabet launched its commercial air delivery business Wing in Australia’s capital Canberra, where it delivers burritos, coffees, pet treats, golf balls and more via drones.
It’s exciting times, but what does this have to do with ageing populations or real estate? As you probably know, Asia Pacific and the other parts of the world are facing rapidly ageing populations, presenting real challenges for communities and their economies.
In a recent report, M&G Real Estate’s research team suggests property investors can take advantage of the increasing take-up of e-commerce to unlock the “silver dollar”. Elderly people, who tend to have more disposable income than working-age people but are often less mobile, are increasingly using home delivery already.
As more and more people turn to online shopping and home delivery, the increased demand will only exacerbate existing labour shortage pressures facing the logistics industry, however drones or autonomous vehicles could be the answer. Jonathan Hsu, APAC head of research at M&G Real Estate, tells APAC Real Estate what this all means for real estate investors:
How can property investors take advantage of the developments in drone delivery today?
JH: To reap the benefits from the development of drone delivery, investors should start focusing on the last-mile logistics facilities servicing suburban/rural customers and central/dark kitchen fulfilling food delivery orders. For logistics facilities, drone delivery would allow businesses to reach consumers in more suburban and rural markets with increased efficiency and speed.
This could potentially increase demand by consumers for home delivery, and in turn bolster demand for more logistics space to fulfil these increased orders. Whereas for central/dark kitchens that support food delivery, using drones for food delivery could also lead to increased demand for central/dark kitchens for food preparation and delivery; these kitchens could be located in industrial properties, suburban shopping centres, or carpark space.
Investors may plan ahead for drone delivery by working with key tenants that are looking to implement drone delivery in the near future. There may also be opportunities for higher specification, built-to-suit for investors to secure long-term income streams with innovative tenant-partners.
What are the risks/challenges that drone delivery present to real estate investors?
JH: Given that it is still early days, investors would need to keep abreast of the local regulations and infrastructure improvements that govern and facilitate drone deliveries, be it to commercial or residential areas to better assess the risks and opportunities for real estate. Updated regulations and infrastructure are likely to be the key to the wider adoption of drones for delivery.
Drone delivery may require real estate owners to retrofit existing warehouse facilities with newer power generators to ensure battery-operated drones have consistent access to electricity. For urban drone delivery centres, there may be zoning issues that bar certain warehouse locations from launching drone services.
As to whether it would hurt bricks-and-mortar retail even more would largely depends on the cost of drone delivery for retailers to fulfil online sales. Currently, it has been reported that online orders are costing retailers more than store-sales due to the associated costs of delivering purchases to consumers, particularly for the ‘last mile’. Should drone delivery help to reduce last-mile costs significantly and is an option available to most retailers, it is likely that retailers might be further pressed to evaluate their physical store networks in relation to their online business.
What other real estate sectors will ageing populations across Asia Pacific have an impact on?
JH: Overall, ageing populations are likely to benefit sectors such as specialized logistics, healthcare and [senior] living. This is not only region-specific to Asia Pacific, but also pertaining to the impact of the ageing population globally.
Increasing demand for specialised logistics assets catering to fresh groceries and medical supplies are expected to be driven by rising delivery demand to aged seniors out of convenience and accessibility needs. These more temperature sensitive items will require climate-controlled cold storage facilities that prevent fresh foods and medication from spoiling.
Health-care related properties such as medical offices and hospitals are also expected to see increased demand that follows the steadily increase in ageing population. Senior housing catering to aged living and assisted living segments should continue to expand with increasing demand as well.
In smaller rural cities, the residential sector may be negatively impacted by dwindling population, or relocation of the [older] population to larger urban cities. For the older generation, access to amenities, healthcare and convenience may motivate many to settle back into the urban setting.
The rise of an ageing population across cities is also likely to have an impact on the design and place-making of properties, as increasingly elder-friendly fit-outs would be required, be it in shopping centres or offices. This may subsequently have an impact on operating and capital expenditure as buildings go through refurbishments to cater for this growing segment.