4 Ways E-Commerce is Throwing Industrial Tenants for a Loop
Online shopping continues to increase and consumers are paying a premium for same-day delivery. How is this affecting industrial tenants that are involved in e-commerce fulfillment?
- Existing space is no longer suitable
Distributors, importers and external vendors of all sizes fulfill much of the merchandise ordered on popular websites, such as Amazon, Walmart and Costco. These third-party vendors, many of which don’t have sophisticated distribution expertise, are tasked with creating e-commerce fulfillment networks. Traditional industrial buildings do not accommodate these tenants very well because more employees are needed to pick, pack and sort merchandise as delivery times get shorter. For example, a traditional 500,000-square-foot distribution center may only have 50 employees, but the same sized e-commerce fulfillment center may require 500 workers.
- High competition for suitable space that does exist
It has become increasingly difficult for industrial tenants to find suitable space in many of the traditional distribution hubs of Atlanta, Chicago, Dallas, Los Angeles and New York/New Jersey/Pennsylvania. In addition, new development in many U.S. markets is not keeping pace with increased demand. As a result, it’s a bit of a mad dash to secure space.
- Omni-channel distribution on the rise
Retail logistics networks continue to evolve. Many retailers have embraced the concept of omni-channel distribution, which utilizes a combination of warehouses, distributors and brick-and-mortar stores to satisfy consumer demand.
- Outsourcing to third-party logistics companies
Many companies are hiring third-party logistics companies (3PLs) to provide outsourced warehousing and fulfillment services when manufacturers, retailers and distributors have more business than they can handle. While this may seem like a strong economic indicator, it could be viewed as a contra-indicator. If large corporations were more confident in the economy, they would be more inclined to redesign their own distribution network and build more of their own distribution centers. Instead, they choose to outsource to a 3PL for shorter term commitments.
As Senior Vice President, Bob Robers specializes in industrial real estate and logistics. More information on how e-commerce and expedited delivery times can be found in Transwestern's first-quarter edition of "Ask the Expert."