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Are 3PLs Next Demand Driver For Last-Mile Delivery Sites?

Hear more at I.CON: Trends and Forecasts, June 8-9

May 26, 2017

Amazon has led the pack in compressing time between the “click” of an online order and the “knock” on the door for delivery. Their next step? Creating the next generation of local delivery infrastructure made up of receiving, sorting and delivery/pick up centers. GlobeSt.com spoke with Conwell about the implications for the industrial sector, which he’ll discuss June 9 at I.CON: Trends and Forecasts. See an excerpt of the article below.

GlobeSt.com: What does Amazon’s push to create more local delivery sites mean for the industrial sector?

Conwell: Amazon created e-commerce as we know it today, and by virtue of its significant head start against the rest of retail and its tens of billions of dollars of infrastructure investment, it will remain the dominant player. The rest of the industry continues to invest heavily – sometimes wisely, sometimes not – in developing competing offerings as it attempts to play catch-up. Some of what Amazon has done can be, and has been, emulated.  But the unique scale and market position Amazon has built cannot be replicated.

During the panel session at I.CON, we’ll talk about Amazon as representative of where the market is moving what that means for industrial real estate. While not the only player in this space, the market leader does largely define where we’re headed. In its quest for control of its entire delivery experience, Amazon continues to invest in all of what I call the four food groups of logistics real estate: large million-plus square-foot highly automated and high labor count fulfillment centers on the periphery of cities; smaller fulfillment centers of between 300,000 and 600,000 square feet closer in metropolitan areas; cross-dock hubs where pallets of orders are redirected along transportation networks; and last-mile facilities embedded deeply within dense urban areas from which the touch before final customer delivery.

The days of the one-million-square-footers aren’t over—there will continue to be a significant demand for them by a variety of retailers and shippers. The smaller fulfillment centers have lower employment levels, but still leverage automation that speeds throughput. These were developed in the never-ending quest to bring more breadth of inventory closer to the customer so it’s available for fastest delivery, since two-day ground delivery doesn’t cut it anymore. The arms race in fulfillment and delivery is to satisfy customer demands for speed and selection.

The single hottest building type Cushman & Wakefield sees in terms of numbers of transactions is last mile, and we expect this demand to continue to be strong. The explosion of Amazon Prime and specifically the Prime Now offering requires placement of the right selection closer to the customer to accommodate immediate delivery.

GlobeSt.com: How will this trend translate to other retailers, and how will the industrial market react, especially in tight markets?

Conwell: Some such industrial facilities have enough utility as-is, and most importantly, are in the right location and are available. There is a significant amount of product that had been considered obsolete or thought to have too little utility for modern distribution use. Much of that product is now being seen through a different lens: There is a tremendous amount of capital in the market today that is pursuing close-in, very well-located buildings in the face of this emerging demand by certain occupier groups.  There will be redevelopment of these assets because we are in the early innings of shippers and retailers learning how to best leverage these kinds of assets, but it’s really all about the location of the asset.

Read the full article on GlobeSt.com, and register today for I.CON: Trends and Forecasts, June 8-9 in Long Beach, California, the critical conference for the industrial real estate sector and your opportunity to network and share strategies with top industrial leaders from across North America.