This article is from the Australian Property Journal archive
ADELAIDE developers will be scrambling to fulfil Metcash’s requirement for a new distribution centre. The grocery wholesale supplier needs to secure a new facility in under four months, to win a major contract with Foodland.
After losing its largest South Australian customer Drakes Supermarkets earlier this year, Metcash has signed a heads of agreement with Foodland Supermarket, to supply Foodland retailers for 10 years, who are predominantly independent single store owners.
The supply agreement is conditional on Metcash entering into an agreement for lease for the new distribution centre by no later than 21 December 2018.
Metcash has been scrambling to replace Drakes Supermarkets after Drakes committed $80 million to build its own 104,000 sqm food distribution and logistics facility on a 17ha site at Edinburgh North.
The failure to renew the Drake deal saw Metcash write-down $352 million, comprising of a $318 million impairment against goodwill and other intangible assets and $34 million against other assets in its supermarket business.
Metcash’s new facility is expected to give Adelaide’s industrial property market a shot in the arm.
In the 12 months to June 2018, approximately 59,349 sqm of industrial space was leased in Adelaide which is well below the five-year average, according to Savills.
Industrial supply has also slipped due to a decline in pre-commitment. Development completion has not reached the 2013 peak of 100,000 sqm. Last year, completion was a circa 30,000 sqm and this year, under 10,000 sqm is completed or under construction.
Knight Frank found defence and the federal government have been the main driver for development & land sales activity. In the past six to 12 months, the government has spent around $402 million purchasing properties (mainly vacant land) in Osborne with the majority purchased from the state government.
It is unclear whether Metcash will lease a centre or buy land and develop its own facility.
Metcash has also signed long-term supply agreements with Foodland multiple store owners such as the Romeo’s and the Chapley’s, as well as the remaining members of the Foodland Supermarket board, who are owners of Foodland supermarkets in South Australia.
Metcash said together with other existing fixed term supply agreements with Foodland and IGA supermarket retailers in South Australia, Metcash now has long-term supply agreements in place with retailers representing the majority of its supermarket sales in that state.
Australian Property Journal
