Top

Choosing Wisely

May 1st, 2019

By Jimmy Glascock
CCIM

View original article

The industrial real estate market is booming and changing rapidly; economic factors and technological advancements are reshaping the way warehouses are built and rented. Consumer demands and sociopolitical factors are also influencing supply chains and logistics real estate. Steel tariffs, for example, can impact construction costs, while freeway congestion and rent increases can spell trouble for those in the industry.

Bigger, Better, More

The central warehousing question has changed from “what can I fit in this space?” to “what space can fit my needs?” Million-square-foot facilities used to be unusual, but they've become something of a norm as companies grow, fueled in part by the rise of e-commerce and new logistics technologies. Still, smaller warehouses are in demand from e-commerce retailers looking for smaller footprints near major metropolitan areas to minimize delivery times.

While walls in newer warehouse buildings are placed farther out to accommodate additional rows and racks, other limitations - namely, roofs and floors - are also receiving makeovers. Super-flat, level floors are invaluable to busy shippers, because they can handle stable stacking and towering racks, particularly when paired with higher roof lines that are also becoming more common. If companies know where to look or which third-party logistics company to partner with to do the legwork for them, no modern business needs to make do with an ill-fitting space.

Technology also plays a starring role in determining appropriate warehouse layouts and capabilities. The power needed for automated pickers, robotics, and other pick/pack equipment could easily overload the output abilities of an older facility. Additionally, a good warehouse fit isn't just about size and power anymore; it's about having adequate HVAC for employees, and racks and refrigeration setups for product stability. Cold chain demands have grown in the health care, food, and beverage sectors. With ever-increasing regulations bearing down on all three, monitoring and ensuring a consistent temperature are crucial to product freshness, quality, and safety.

The New Place to Be

Along with products and warehousing needs, logistics transport is changing as well. Electric transport vehicles, while not widespread yet, could become more commonplace over the next five to 10 years. This potential disruption means newer facilities need to accommodate the needs of these trucks, such as convenient charging stations in or nearby the facility.

Warehouses in port-adjacent, temperate, well-connected areas are crucial to staying competitive.

The proximity to certain ports needs to be kept in mind as well. If the nearest port isn't deep enough to accommodate large ships bringing in containers, additional costs are required to close that gap to the warehouse. Deepening ports triggers full environmental impact studies - a cost and delay that few can afford to soak up.

Balanced with these two needs, as always, are customer demands. The “Amazonization” of shipment has arguably raised expectations, with customers now expecting their orders - regardless of product type - in days, rather than weeks. This pressure emphasizes the need for warehouses to be close to consumers.

Warehouses in port-adjacent, temperate, well-connected areas are crucial to staying competitive - and most companies are making these traits must-haves when searching for new locations. Considerations can extend beyond location and physical structures. Labor availability can impact a warehouse's feasibility as well. If another large user of labor is nearby, not only will comparable employee wages need to be considered but a large concentration of people in the area will affect traffic levels - additional considerations when selecting a site.   

A facility that's a poor fit for your needs can cost far more than simple inconvenience during picking and packing. A location near a major water source, for example, can mean high humidity, affecting ventilation requirements and, if not properly planned for, increased condensation on the warehouse floors. Choices like this can be righted but require changes after the fact. It's more important than ever to be aware of how consumer demands, a poorly chosen location, and other factors can all mean missed opportunities, diminished consumer trust, and sluggish or stagnant growth.  

Jimmy Glascock is president of JDK at Kenco Group, a Chattanooga, Tenn.-based logistics and supply chain management company. Contact him at jim.glascock@kencogroup.com.

The Axis Promise
To always keep the needs of our tenants top of mind as we make sound, strategic decisions in order to build and maintain a positive, impactful, and beautiful environment in which your company and its people may thrive.
Be a part of industrial park evolution.
Arrange a Viewing Today
Tamarack Investments is a privately-held real estate investment company based in Atlanta, GA. Tamarack seeks to acquire, develop and reposition various types of commercial real estate projects in the Southeastern United States that have the potential of delivering superior, risk-adjusted returns to investors.