Should Traditional Distribution and E-Fulfillment Live in One Building?

If you live in the U.S., there is an Amazon warehouse less than 20 miles from you, according to L2, Inc. E-commerce made warehouses, distribution centers, and fulfillment centers “sexy” again. The cloud and wireless technology has transformed clunky cement buildings into data centers and now, ULI (Urban Land Institute) puts warehouses and fulfillment centers at the top of their Emerging Trends Report for 2018.

However, while vacancy rates have been well below average for years and prices continue to go up, e-commerce supply chain spaces – warehouses, distribution, data, and fulfillment centers – are still evolving. Instead of slowing, construction in industrial warehousing is increasing and the buildings are getting taller and bigger in order to fill the growing demand for local same day deliveries.

That is the impetus behind the new trend in retail to streamline distribution and fulfillment centers by consolidating online shipping and delivery with new and traditional brick-and-mortar delivery supply chains. This trend is reshaping the industrial CRE sector as developers and building owners work to accommodate combined services.

 

E-Commerce Consumers Drive Distribution and Fulfillment Streamlining

Some of the biggest names in traditional retail are driving the changes happening in distribution and fulfillment; the move to streamline operations by utilizing their existing supply chain assets. Wal-Mart joins Kroger in competing with Amazon for space in both brick-and-mortar and e-tail, recently opening a 2.2 million square foot fulfillment center in Florida to handle its online orders.

Consumers are the driving force behind all of the changes, demanding faster and cheaper on-demand delivery. Now brick-and-mortar is trying to outmatch the convenience of online ordering with same day delivery of everything from clothes to medicine to food. In turn, distribution and fulfillment channels are being combined into one building in order to overcome last mile issues within cities using a combination of store front warehousing and shallow-bay warehousing and distribution nearby.

 

Distribution Spaces are Getting Bigger and Taller

The need for more industrial warehousing space within city limits is forcing builders and building owners to think outside of the box. Without the space to expand campuses like they have in the past out in the suburbs, retailers are looking to build bigger, taller buildings.

As the demand for faster local deliveries from retailers of all kinds continues to grow (convenience stores are even getting in on the act), so will the need for more space inside of in-city distribution and fulfillment centers. Because space is limited, building up increases the amount of shelving space available while also making room for more tech-enabled equipment including robots, AI, and other automated machinery.