‘Tis the Season – To Redefine Retail Supply Chain Real Estate

By Craig Meyer and Kris Bjorson

‘Tis the season to order last-minute, gift-wrapped goods for next-day home delivery. But our growing demand for near-instant gratification via e-commerce means cookie-cutter industrial facilities of yesteryear are no longer going to cut it, according to a recent Jones Lang LaSalle report.

Today’s retail logistics strategy is evolving fast, and changing the industry’s real estate needs from a simple matter of storage space for bulky pallet-to-store delivery to more specialized warehousing options that drive faster dock-to-doorstep times to support retailers’ omni-channel strategies.

The business case for commercial real estate executives and brokers to accommodate this growing need with modern physical distribution network space is compelling: global e-commerce sales neared $600 billion last year. Moreover, with e-commerce accounting for just four percent of worldwide sales, there is incredible room for growth in the sector.

New supply chain strategy = new real estate landscape

For traditional and e-commerce retailers, storage is not the only consideration. Enabling efficient picking, order fulfillment and fast home delivery in major and secondary markets are critical to an omni-channel strategy. Here are 6 new types of retail logistics facilities:

  1. Mega e-fulfillment centers: 500,000 square feet to 1 million plus—ideally with high bay and cross-dock configuration—to stock and pick efficiently at item level
  2. Parcel hubs: buildings with high length-to-width ratio and 360-degree circulation, where parcels are sorted by zip code before being transported to local delivery centers
  3. Local delivery centers: facilities with high length-to-width ratio, low site density and cross-dock accessibility for loading vans for ‘last mile’ fulfillment
  4. Urban logistics depots: situated in or at the edge of major markets, these facilities enable efficient loading and circulation for rapid throughput
  5. Return processing centers: depending on the nature of the operation, these facilities are often bespoke to process returned items prior to transporting back to e-fulfillment centers
  6. Dot.com warehousing for food e-fulfillment: extensive yard area for trailers and vans are a must in these sites, as are extensive employee parking for a high number of staff

Indeed, retail logistics and supply chain needs have changed significantly—but this is not the first time warehousing needs have changed. Supply chain real estate has been steadily evolving—from the 70s, when wholesalers delivered directly to retailers, through the 80s, when retailers took more control by setting up their own distribution centers, to the 90s, when retailers developed import centers for global sourcing.

Now the opportunity is to once again rise to the occasion, recognizing the massive growth potential in omni-channel-friendly real estate.

Craig Meyer is President of Industrial for Jones Lang LaSalle, and Kris Bjorson is Head of Retail E-commerce Distribution for Jones Lang LaSalle.