The Rapid Change Underway With Industrial Logistics
By Randyl Drummer | August 23, 2018
The Amazon Effect has not only ramped up industrial activity and demand, but it has completely changed industrial logistics and warehouse design as well. Logistics today are already totally different than they were 10 years ago, and in the next decade, it will continue to change rapidly. The changes include the need for larger warehouse spaces, multi-story warehouses and infill properties that can accommodate same-day shipping.
“Warehouse space design is already different than it was five to 10 years ago. For example, prior to the e-commerce evolution, industrial developers would maximize every square foot of a property and build the largest building possible on a parcel of land, leaving little room for employee parking,” Jon Pharris, president of industrial developers and owner CapRock Partners, tells GlobeSt.com. “However, e-commerce tenants require significantly more parking availability for their employees, especially during the peak season, approximately Aug. 1 through Dec. 31. E-commerce users generally do not use as many dock high doors as a typical industrial tenant. They are converting their unused truck courts to expand parking availability and create employee amenity areas.”
In the next decade, these needs will continue to change at a rapid pace. First, more industrial space is needed to accommodate not only demand but the ecommerce use, which requires more space. “More industrial space will be required. NAIOP recently published a report stating that for every square foot of retail space that is lost due to the e-commerce evolution, three square feet of new industrial space will be required,” Pharris says. “The Amazon Effect is trickling down into companies that might not appear to be e-commerce retailers. As customers prefer shopping online instead of at brick and mortar locations, some non-consumer facing companies are taking another look at their business plan and finding opportunities to become third-party fulfillment centers for consumer-facing brands.
Retailers, in general, will also shrink brick-and-mortar storefronts in the future and grow omnichannel platforms. This trend will also drive a need for more industrial space. “Retailers also don’t need as much space at expensive storefronts as they once did,” says Pharris. “The area dedicated to inventory storage, known as “behind the curtain” can now be replaced with less expensive accessible nearby warehouses.”
Today, demand is concentrating in infill urban markets close to population centers, but with the need for more industrial supply, demand will likely grow in secondary markets as well. “This will likely result in additional industrial demand for secondary and tertiary markets so that companies can send their products directly to consumers within 24 hours or even same day,” adds Pharris. “Of course, in major urban areas, two-hour shipping is already a must with Prime Now and equivalents.”
Warehouse design will also continue to shift. Ecommerce users have specific needs, so it isn’t only a need for more industrial supply but also a need for specific characteristics. “For example, with new mechanical handling equipment (MHE) and an increase in the number of robotics, access to higher levels of electrical power will likely be required in the future,” says Pharris. “Also, building clear heights have already increased on the largest industrial buildings to 40 feet and above. While in 2007 30-foot or 32-foot clear height was considered industry standard for class-A buildings, almost every new warehouse built today that is 1 million square feet or larger has 40-foot clear height ceilings.”
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