HOW E-COMMERCE AFFECTS WAREHOUSE SELECTION

Pursuant to studies conducted by Prologis, the leading owner, operator, and developer of industrial real estate, the following insight is provided:

Although e-commerce is having strong growth , it still remains a relatively modest share of the total demand and can’t shift industry practices alone.   Presently e-commerce represents approximately 10% of new leasing.  Many e-commerce customers find existing facilities meeting their needs.  As over 40% of Prologis customers are in buildings that are 10 years or older.

There is a gradual evolution in the types of properties that will be most successful, and e-commerce customers are contributing to these changes.  Large e-commerce tenants have sought build-to-suit projects for specific building features and site characteristics.  Few of these needs require substantially different construction or layout changes.  Many of these facilities have been designed to accommodate a generic second-generation use.  The following are important considerations:

Location:  Many factors are considered in the location selection, such as access to labor and shipping nodes.  Proximity to their end-customers is very important.  The economics of proximity are enhanced as tax laws evolve toward treating online sales and in-store sales the same. Strongest demand for e-commerce facilities is to be within and adjacent to major population centers.

Mezzanines.  E-commerce remains to be predominantly hand-picked on foot, shelf heights rarely rise above 6 feet.  Larger fulfillment facilities cebter requirements leverages mezzanine floors to house shelving installations. 

Employees.  E-commerce fulfillment requires a substantial amount of labor compared with traditional distribution.  E-commerce facilities must accommodate higher employee counts with employee orientated spaces such as locker areas, break rooms, and restrooms.

Power.  E-commerce centers have additional equipment, such as intensive HVAC for employees or automation equipment.

Dock Doors.  Many e-commerce users only use dock doors on one side.  These facilities hold inventory and goods for shipping, rather than for cross-dicking distribution.

Additional Space.  Security is higher at e-commerce facilities, which requires incremental space needs both inside the facility and around the site.

Ceiling Height.   New construction is following conventional maximum ceiling height that is at least 30 feet in most markets, and up to 36 feet in other markets.

Site Coverage.  Higher employee counts in each facility requires more parking for employees.  Extra parking is especially important where employees commute by car.  Sometimes truck parking can be repurposed for employee parking.

E-commerce fulfillment is presently in its infancy, but it appears this trend is emerging.  Omnichannel concepts, which require products to be where customers want them when they want them, ask and require more of supply chains.  The answers to important questions will mature during the coming years as fulfillment models grow and become more refined.