E-Commerce Tenant DemandAugust 28, 2014
E-Commerce companies are becoming a powerful force in logistics based real estate decisions. Logistics based decisions are made with the logistics of a company’s consumer base at the forefront of the location selection. There are approximately 600 companies across the U.S. and Europe with online revenues of $50M to $2.5B, data from Internet Retailer show and annual sales amount to $750B globally.
If you are in the market to lease a traditional distribution facility, you will find these companies in competition with you for space. If e-commerce distribution is a part your business, the information provided here may give you insight as to where you fit in the continuum of the growth process.
According to Prologis, the leading owner, operator and developer of industrial real estate, e-commerce users require three times the space, or more, compared to brick and mortar users. Prologis published its white paper on the topic (link to complete paper below) but I’ve highlighted a few of the points for you here.
Adding E-Commerce to traditional Brick and Mortar sales
More and more, companies that have been traditionally brick and mortar sellers and distributors are now adding an e-commerce component to their business. The graduation of a company’s facilities based on its increased e-commerce activities is below:
- Combined Operations – E-commerce activities operate from the same facilities as the company’s brick and mortar distribution
- Shared Facilities – Leasing dedicated space for e-commerce in a multi-tenant facility or outsourcing this part of the business to a third party logistics provider
- Dedicated Facilities – Online fulfillment has reached the place where its distinct needs require its own dedicated, free standing space
- Distributed Fulfillment – Multiple locations based on logistics are required
While e-commerce companies aren’t significantly shifting the types of properties demanded, building features and site characteristics that are important considerations are:
- Location – Access to labor, shipping nodes and proximity to end customers are increasingly important
- Mezzanines – Hand-picked, on foot shelf heights rarely rise above 6 feet which leverage mezzanine floors to house these shelving installations
- Employees – The substantial amount of labor required in comparison to traditional distribution facilities calls for more employee oriented spaces (lockers, break areas and restrooms)
- Power – Additional HVAC or automation equipment requires more power
- Dock Doors – Single sided docking instead of cross docking distribution is used
- Additional Space – Higher security needs require incremental increases in space
When looking for space, starting early and choosing a commercial real estate broker to represent you exclusively gives you the advantage of knowing the market and being presented with as many viable options for your company as possible.
Contact me to discuss your company and your facilities plans for the future. I look forward to hearing from you.
Complete Prologis Article: Inside the Global Supply Chain: E-Commerce and a New Demand Model for Logistics Real Estate