Warehouse Industry’s Move to the City

Transwestern’s Walter Byrd discusses what drives industrial users and retailers to the urban core, the challenges that come along with this move, as well as the hottest urban warehouse markets.
Walter Byrd, senior managing director, Transwestern

The rise of e-commerce has led to an increasing demand for urban core warehouses. Although it costs more to purchase such in-demand buildings, buyers are still at advantage due to pricing gains, in addition to the fact that such assets attract top tenants.

When it comes to distribution operations, transportation is the costliest expense, a new report from Hofstra University shows. While some areas benefit from good infrastructure, due to their suburban positioning, others face challenges such as traffic congestions or are far off delivery routes. A desirable location for warehouse owners looking to increase overall profitability is in a delivery route’s “last mile.” Transwestern Senior Managing Director Walter Byrd provided his insight into the urban warehouse market in an interview with Commercial Property Executive.

What should today’s industrial users and retailers take into consideration when choosing a location?

Byrd: After the cost of goods and inventory, transportation and labor continue to lead the way expense-wise. Accordingly, these factors are what most operational groups focus on when considering location—and then, they pick the best physical real estate asset that fits those needs.

What challenges do they face along the way?

Byrd: The primary challenge industrial users and developers face is adapting existing industrial properties that often have some functional deficiencies. They must make modifications in a cost-effective way that enhances their utilization. The most common functional deficiencies include ceiling clear height, loading capacity and site configuration.

Describe the warehouse of the future.

Byrd: It all depends on what part of the country or which city users are we considering with regard to what warehouses will look like. Warehouses continue to evolve along with supply chain evolution based on the sourcing of goods and the demands of the end user.

Point out the hottest markets that have emerged due to the growing demand for urban warehouses.

Byrd: The trend started with the denser population centers such as New York City, and is evolving to focus on major centers such as Washington, D.C., South Florida, Los Angeles, San Francisco and Seattle. The trend is also starting to appear in large metroplexes such as Dallas, Atlanta and Chicago, where there is no barrier to development, but transportation costs continue to increase with the suburban sprawl.

Image courtesy of Transwestern