I Want It – and I Want It Right Now!

Prologis-Warehouse-Seattle

PHOTO: PROLOGIS

It’s a refrain we used to hear exclusively from the K-12 bunch, but not any longer. Amazon have raised the bar and set higher expectations. Once we’re done with our online shopping we expect our purchase to arrive on our doorstep the very same day, and of course not to be charged for its delivery. In some cities Amazon even offers free two hour delivery!

Same day delivery is an immense supply chain challenge for logistics professionals, particularly in big cities. One of the pieces in the puzzle is to place products closer to the consumer. But in big cities available space to build warehouses is limited and real estate prices are high. So what do we do?

Go Vertical

Prologis, the world’s biggest warehouse owner, think they have the answer. They are planning the construction of a multistory warehouse just outside downtown Seattle. It is a three-story 580,000 ft.² facility with a truck ramp to loading docks on the second level plus a third-floor which is accessible via freight elevators.

According to the Wall Street Journal

“Major urban areas are running out of industrial space,” said Hamid Moghadam, chief executive of Prologis. “The only way the logistics sector can compete is with this denser format.”

Industrial Vacancy Rates Are Below 5%

Industrial vacancy rates have remained below 5% in major US cities. Warehouse builders have been reluctant to build without a tenant already in place, which has had the effect of significantly constraining development. Constrained development drives down vacancy rates and drives up rents.

It is within this very tight climate that analysts estimate Prologis will charge as much as 50% higher than standard warehouse rental rates for the multistory facility. The benefits for the tenants are that they save money on delivery costs by locating much closer to their customers.

Multistory Warehouses Are Already Successfully Deployed in Asia

Multistory warehouses are not new. Asia has been successfully building them to serve their own exploding e-commerce business. Cities such as Singapore, Hong Kong, Tokyo, and multiple cities in China and South Korea are all highly land constrained with limited industrial land for development.

Prologis are a player in the Asian market and have extensive experience in development of multistory warehouses. In fact they have just completed a 99,200 m² multistory logistics center at the Beijing Airport Logistics Park. This was fully leased upon completion in the first quarter of 2016.

The Beginning of a Trend in the US

Don’t be surprised if we start seeing multistory warehouses popping up in places such as New York, San Francisco, Los Angeles and Chicago. The relentless pressure from the “I want it right now” e-commerce consumer will see to that. They have been successfully deployed in Asia to meet consumer demand so a pre-existing model is already in place.

If new construction jobs and warehouse jobs are being created in order to provide the consumer what the consumer actually wants, then in my book that can only be a good thing.

We see this trend ourselves at New Mexico Transloading. There is a steadily growing demand for our covered and uncovered storage/warehousing and it’s from our clients wanting to locate their goods closer to their customers. This significantly reduce their delivery times which in turn increases customer satisfaction and builds customer loyalty. It’s a service we’re very happy to provide.

If you’re interested in our storage and warehousing services or learning how shipping by rail might better meet your freight transportation needs call New Mexico Transloading at 505 – 908 – 1911. We’d be delighted to have a conversation with you.

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