{"id":1004546559,"date":"2021-08-11T09:07:01","date_gmt":"2021-08-11T17:07:01","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004546559"},"modified":"2022-12-08T17:24:02","modified_gmt":"2022-12-09T01:24:02","slug":"the-struggle-to-site-last-mile-distribution-facilities","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/the-struggle-to-site-last-mile-distribution-facilities\/","title":{"rendered":"The Struggle to Site Last-Mile Distribution Facilities"},"content":{"rendered":"\n

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Demand for last-mile industrial facilities is at an all-time high. With e-commerce sales increasing 15 percent every year since 2010, the need to deliver products faster has created a demand surplus<\/a>, leading to bidding wars across the industry. According to a JLL industrial tenant demand study, the number of new entrants to the e-commerce sector increased by 21 percent year-over-year in 2021.<\/p>\n\n\n

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READ THE DIGEST<\/a><\/div>\n<\/div>\n\n\n

Finding opportunities can prove difficult, with so many companies going after the same facilities. Meanwhile, the industry has shifted from traditional investors to retailers and groups focusing on entering the urban last-mile space with new capital.<\/p>\n

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Prologis Bronx formerly served as an outlet store for ABC Carpet & Home, before being redeveloped into a distribution hub now occupied by Amazon. Image courtesy of Prologis<\/p><\/div>\n

Supply challenges<\/h2>\n

Completions are expected to continue falling short of demand in most locations, being impacted most by geographic, economic and political barriers, as noted in a recent Prologis report.<\/p>\n

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READ ALSO:<\/strong> Industrial Rents, Investment Soar<\/a><\/p>\n

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Land that can accommodate these last-mile facilities is scarce, especially in markets recording higher population growth. This, in turn, is driving up development costs for new projects on existing parcels, adding to time-consuming challenges such as permitting and entitlement.<\/p>\n

\u201cWe\u2019re seeing this already in major gateway markets such as New York City, Seattle and all around Philadelphia, to name a few,\u201d said John Plower, senior managing director, Industrial Capital Markets, JLL. \u201cReally, anywhere that there are big critical mass population centers, we will see more facilities popping up.\u201d<\/p>\n

With the increase in product going in and out of these facilities, buildings have gotten larger over the years and need more square footage. Buildings developed since 2000 across the U.S. are 55 percent larger and require 68 percent more land on average, according to the Prologis report.<\/p>\n

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The more than 305,000-square-foot facility in Philadelphia was purchased by Greek Development and is fully occupied by Dependable Distribution Services, the largest cocoa bean distributer in the U.S. Image courtesy of JLL<\/p><\/div>\n

\u201cFinding suitable land is getting more challenging, as industrial-zoned land is shrinking in cities,\u201d said Melinda McLaughlin, global head of research with Prologis. \u201cAt the same time, regulatory restrictions and population expansion have pushed new logistics supply farther out.\u201d<\/p>\n

For example, in the Greater New York City area, industrial properties built before 2010 were located, on average, 28 miles from Manhattan but, post-2010, the figure rose to 50 miles, she explained. This distance can lead to higher rent premiums, as companies strive to meet expectations for fast delivery.<\/p>\n

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READ ALSO:<\/strong> Top 5 Industrial Transactions of 2021<\/a><\/p>\n

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Transportation is the highest cost associated with distribution. As more consumers engage in e-commerce, companies will continue to develop last-mile strategies allowing for more cost-efficient deliveries, getting them closer to customers while cutting down on transportation costs. <\/p>\n

Conversion potential<\/h2>\n

According to CBRE research, last year there were 59 projects either completed, proposed or under development for retail to industrial conversion since 2017, which marked a jump from 24 projects in 2019. These projects totaled 13.8 million square feet of retail converted to 15.5 million square feet of industrial. Major markets for this include Milwaukee, Wis.; Cleveland, Ohio; Chicago; Omaha, Neb.; and Dallas-Fort Worth.<\/p>\n

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The single-tenant, triple-net-leased warehouse in Sacramento is situated nearby interstates 80 and 15 to aid in last-mile delivery to more than 2.4 million metro-area residents. Image courtesy of JLL<\/p><\/div>\n

\u201cConsumers are demanding orders to their doorstep, one item at a time. Retailers, therefore, need to move items as close to the market as possible and do it with scale. Being efficient requires a logistics strategy that leverages those single orders with others into fewer total vehicles,\u201d said John Morris, executive managing director, CBRE.<\/p>\n

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READ ALSO:<\/strong> TA Realty on Industrial\u2019s Lasting Growth Spurt<\/a><\/p>\n

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Retail sites have become the first choice for industrial conversions because they are usually located within highly populated areas, have large parking lots and many are freestanding stores that already offer dock doors and clear heights that will make the transformation into a last-mile facility compatible.<\/p>\n

\u201cThe orders come into a last-mile facility and ride alone as single deliveries for as little distance as possible. That\u2019s supply chain efficiency at a local, congested, urban level,\u201d added Morris.<\/p>\n

However, those that don\u2019t offer these elements are more likely to be demolished and replaced. Additional barriers include community opposition and restrictive zoning, poor configurability of existing structures and inefficient layouts, co-tenancy limitations and multi-party negotiations that prevent redevelopment.<\/p>\n

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EQ Exeter purchased the vacant facility located in Charlotte, N.C.\u2019s Airport Industrial submarket, will plans to reposition the asset. Image courtesy of JLL<\/p><\/div>\n

\u201cThe challenge with infill locations is that there\u2019s no land that\u2019s undeveloped,\u201d said Plower. \u201cIf the land was just sitting there then you\u2019d prefer to take that and control the development from the start, but that doesn\u2019t exist in these mature locations that were developed decades ago. The question comes down to: Does this investment make sense?\u201d<\/p>\n

Prologis research estimates that only 50 million to 100 million square feet of retail will be converted to logistics space over the next 10 years, representing less than 3 percent of a typical year for new logistics supply. A successful example of such a conversion would be Prologis Bronx. Formerly an outlet store for ABC Carpet & Home, it was redeveloped into a distribution hub that is now occupied by Amazon.<\/p>\n

\u201cIn Last Touch-appropriate locations, undeveloped land is extremely rare,\u201d said McLaughlin. \u201cTherefore, in many cases, redevelopment is your only option. Increasingly, rising land values are also justifying multi-story properties in the best U.S. and European locations.\u201d<\/p>\n

Read the July\/August 2021 issue of CPE.<\/em><\/a><\/p>","protected":false},"excerpt":{"rendered":"

With the niche booming, investors are looking to enter the market any way they can. <\/p>\n","protected":false},"author":746,"featured_media":1004546561,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1521,21748],"tags":[32789,32796,32956],"class_list":["post-1004546559","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-digital","category-industrial","tag-cbre","tag-jll","tag-prologis"],"acf":[],"yoast_head":"\nThe Struggle to Site Last-Mile Distribution Facilities - Commercial Property Executive<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.commercialsearch.com\/news\/the-struggle-to-site-last-mile-distribution-facilities\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The Struggle to Site Last-Mile Distribution Facilities\" \/>\n<meta property=\"og:description\" content=\"With the niche booming, investors are looking to enter the market any way they can.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.commercialsearch.com\/news\/the-struggle-to-site-last-mile-distribution-facilities\/\" \/>\n<meta property=\"og:site_name\" content=\"Commercial Property Executive\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/CPExecutive\" \/>\n<meta property=\"article:published_time\" content=\"2021-08-11T17:07:01+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2022-12-09T01:24:02+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2021\/08\/Prologis-Bronx.-Image-courtesy-of-Prologis.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1500\" \/>\n\t<meta property=\"og:image:height\" content=\"1125\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"IvyLee Rosario\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@cpexecutive\" \/>\n<meta name=\"twitter:site\" content=\"@cpexecutive\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/the-struggle-to-site-last-mile-distribution-facilities\/\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/the-struggle-to-site-last-mile-distribution-facilities\/\",\"name\":\"The Struggle to Site Last-Mile Distribution Facilities - Commercial Property Executive\",\"isPartOf\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/the-struggle-to-site-last-mile-distribution-facilities\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/the-struggle-to-site-last-mile-distribution-facilities\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2021\/08\/Prologis-Bronx.-Image-courtesy-of-Prologis.jpg\",\"datePublished\":\"2021-08-11T17:07:01+00:00\",\"dateModified\":\"2022-12-09T01:24:02+00:00\",\"author\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/#\/schema\/person\/f2094ece0e063845f848c7f1c7b84780\"},\"breadcrumb\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/the-struggle-to-site-last-mile-distribution-facilities\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.commercialsearch.com\/news\/the-struggle-to-site-last-mile-distribution-facilities\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/the-struggle-to-site-last-mile-distribution-facilities\/#primaryimage\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2021\/08\/Prologis-Bronx.-Image-courtesy-of-Prologis.jpg\",\"contentUrl\":\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2021\/08\/Prologis-Bronx.-Image-courtesy-of-Prologis.jpg\",\"width\":1500,\"height\":1125,\"caption\":\"Prologis Bronx formerly served as an outlet store for ABC Carpet & Home, before being redeveloped into a distribution hub now occupied by Amazon. 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