E-Commerce Innovator Macy’s Upgrades Fulfillment Center

Local analysts agree Macy's Inc. picked a great time to triple the size of its fulfillment center to accommodate e-commerce by moving into a new location in Sacramento.
Garrick Brown, DTZ

Garrick Brown, DTZ

Macy’s, Inc. will relocate its 92,000-square-foot West Sacramento direct-to-consumer fulfillment center to a 385,000-square-foot facility in Sacramento County to support continued sales growth driven by the company’s omnichannel strategy.

Located at 6200 Franklin St., Macy’s plans to upgrade the new fulfillment center with building modifications, the latest technology in material handling equipment and warehouse management systems. It’s expected to open operations in the new location this summer.

Analysts in the area say the industrial market is very healthy so it was a good time for such a move.

“We’ve seen quarter-over-quarter drops in vacancy, we’ve seen a lot of Class A industrial space get gobbled up, and overall rates are starting to climb in Class A product,” Matt Cologna, Cushman & Wakefield’s senior director, told Commercial Property Executive. “Our fourth-quarter report shows vacancy at 11.4 percent, which is down from last year by more than 2.5 points.”

Because there is some speculative development coming out of the ground and some buildings expected to come back to the market soon, Macy’s did have some options when deciding on a new space.

“As a matter of timing and rate, plus a relatively good package they got from the County of Sacramento, this was a good move for Macy’s,” Cologna said. “This will take one of the larger reasonably priced spaces off the market, which will now force other tenants looking at the area, generally speaking, into some higher-priced property.”

The move comes at a time when e-commerce sales in the U.S. are growing at its highest rate ever.

“The pace of sales growth for online retail has been averaging 15 percent to 18 percent annually compared to bricks and mortar sales growth in the 3 percent to 4 percent range for each of the past five years,” Garrick Brown, DTZ’ vice president of research, West region, told CPE. “The commerce department hasn’t released 2014 data yet but it appears that the pace is accelerating and some anecdotal evidence suggests the pace of increase may be close to 19 percent or 20 percent for 2014. It’s just the continued shift towards more online shopping.”

According to Brown, Macy’s may have about 14 department stores they are planning to close in the coming year, but their plans for increased e-commerce fulfillment center hiring should actually result in a net gain of jobs nationally, and the best way for them to grow right now is building their e-commerce platform further.

“The good news is it will create at least 175 jobs to start and probably more and that it could build momentum for e-commerce fulfillment centers in Sacramento and the Central Valley where costs to develop these kind of specialized buildings are significantly lower than what it would cost in the Bay Area or Los Angeles basin,” he concluded.