E-Commerce Users Demand BTS–With Flexibility

As the e-commerce market heats up, industrial developers are scrambling for a piece of the action. That was the word from "The End User's Perspective" session at NAIOP's brand-new E.CON e-commerce conference in Phoenix on Thursday.

As the e-commerce market heats up, industrial developers are scrambling for a piece of the action. But while retailers want to get up and running, they are not interested in speculatively built fulfillment centers. That’s the word from the “The End User’s Perspective” session at NAIOP’s brand-new E.CON e-commerce conference. The conference, which got underway yesterday in Phoenix, drew 300 people exploring how this growing economic sector is impacting the industrial real estate business.

“Every end user has different specific needs,” said moderator Scott Belfer, senior vice president at CBRE Inc. And given that the sector is relatively new and quickly evolving, there is no way to come up with comparable specifications. For that reason, build-to-suits make the most sense, affirmed executives from retailers The Home Depot and Newegg Inc. and developer IDI Inc.

They expect such properties to take longer to put up than a traditional bulk warehouse, but with extra time needed to implement operational functions, the developer is under increased pressure to complete construction of the real estate. Mark Holifield, senior vice president for The Home Depot, estimated that his company’s product can take more than a year to get up and running. And Kunal Thakkar, senior vice president of operations for Newegg, noted that the technology alone can take five to eight months to install. To speed up Newegg’s ability to start producing at a new facility started last year, IDI will complete it in phases, with the area for bulk shipments launching on April 7 and the individual fulfillment capacity becoming available in August.

With technology continuing to evolve, even a built-to-suit property must be flexible enough to adapt over time. “The more technology comes in, the more changes there are,” said Thakkar. Customer expectations may also change, forcing a shift in approach.

Doug Armbruster, senior vice president & regional managing director for IDI, advised ensuring the property is bigger, taller, with wider columns than a traditional bulk warehouse and able to accommodate expansion. It should also be well insulated, meeting the energy code as well as incorporating smart lighting and temperature controls (think future changes in environmental control and stormwater requirements, not just e-commerce needs, he advised).

“You have to be flexible enough to cater to any changes right away,” Thakkar concluded.