“Last Mile” Commercial Warehousing



Needs in commercial real estate continue changing, expanding, declining, and automating. With the closure of 100s of suburban mall anchor stores, it’s very clear that e-commerce growth is driving the decline in much of traditional retail. However, e-commerce retail is all about tangible products that still need to be first distributed regionally and then quickly to the end consumer. Consumer demand for rapid delivery of orders is further driving demand for multiple “last mile” facilities in major markets.

 

Overall, U.S. commercial real estate continues to be a safe harbor for international investors. Aging boomers will drive up demand for senior housing and medical office buildings. Crowdfunding is gaining ground and should become a pivotal method for developers and investors to gain access to capital. Transforming commercial warehouse real estate is Technology, which increases connectivity, provides better data analysis, along with better logistics and smarter buildings that improve productivity and delivery times.

Many Miles of Automation

Beyond capturing more and more of the consumer market, e-commerce continues needing to increase and automate intermodal (trucks, rail, ships, etc.) facilities across the country. Several research reports show increases of imports into seaports. From the sea continues an inland increase in rail and truck usage.

E-commerce technology demands improved transportation technology beginning out at sea and extending with more demand for large regional distribution facilities having sophisticated warehouse management systems. In-land rail usage is showing particularly strong demand. That trend is expected to continue.

Meeting Demand for the Last Mile

It’s much more than just space and location that is needed for the last delivery from warehouse to end consumer. Automated order picking as well as land scarcity near urban centers is driving warehouse capacity vertical. Evermore sophisticated warehouse management systems require minimum ceiling heights of 30 to 36 feet and going higher. Along with this comes the need for thicker floors to support the weight and stable storage systems with mechanical retrieval systems able to efficiently and safely operate at these heights.

Along with a need for quick access to rails and roadways is a need to attract an adequate labor force. Brawn and muscle are still needed but not as much. There is an increasing need for IT skills that compete with most other industries. This means meeting the needs and demands of more sophisticated workers. Everything from improved security, to land intense parking facilities, to public transportation access, and a coffee shop with fresh pastries right around the corner.

Once the railcars and semi-trucks deliver bulk products to the last mile, quick and easy access to local urban and suburban parcel delivery is vital. Today’s supply chain management is much more demanding than it has ever been before. And is becoming increasingly more so.

Highly efficient “last mile” warehouse leasing rates are expected to increase at an annual rate of about 6 percent. Among other cities, these include places like Chicago, Denver, and Atlanta. In general, e-commerce demand for more and more efficient warehouse space is expected to increase annual lease rates by about 2.5 percent at least through 2018 and almost certainly beyond.

Please leave a comment if this article was helpful or if you have a question.

Author bio: Brian Kline has been investing in real estate for more than 35 years and writing about real estate investing for seven years. He also draws upon 35 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest. In the Olympic Mountains with the Pacific Ocean a couple of miles in the opposite direction.

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