Last-mile Fulfillment

Same-day delivery expectations for nearly every online purchase, including groceries, are driving real estate space demand and the increased use of robotics and other technologies that get goods into the hands of consumers more quickly and efficiently.

IN MARCH, NAIOP HOSTED a first-of-its-kind conference focused on the industrial “last mile.” Same-day delivery expectations for nearly every online purchase, including groceries, are driving real estate space demand and the increased use of robotics and other technologies that get goods into the hands of consumers more quickly and efficiently.

Jim Neyer

Like the 300 other commercial real estate professionals who attended CRE.Insights: The Last Mile 2018, I’m trying to keep up with the pace of change that has resulted from e-commerce growing at a 16 percent annual rate, with no end in sight.

The conference content focused on disruptive technologies and other factors that are challenging the status quo of distribution space. The event’s location in Seattle gave 
us a firsthand look at Prologis’ Georgetown Crossing, the first modern multistory distribution facility to be built in the U.S., which is located in a dense, urban location.

We also toured an AmazonFresh pickup facility, where customers can pick up groceries ordered online, and an Amazon Prime Now fulfillment center, which processes online orders of groceries and other goods that are delivered to consumers within a one- or two-hour window. The number of products in each venue and the efficiencies for fulfillment are game changers for retail sales. Amazon chose locations for these facilities that optimize last-mile delivery, with quick access to the majority of the surrounding urban population. Grocery e-commerce continues to boom, with all major grocers exploring new and more efficient methods for both shopping and delivery. This is truly a new era of grocery shopping.

Free delivery remains the most important factor to most consumers, but fast delivery is quickly becoming almost as important. Thus, last-mile fulfillment centers close to the consumer become essential. With quicker turnover of inventory, these facilities must become more efficient at bringing in bulk inventory, breaking it down, picking individual items and delivering them. Clear height for storage becomes less important as access to employees, freelance delivery drivers and the local transportation network dominates location decisions.

Amazon certainly grabs the headlines, but Walmart, Target and Best Buy are all in aggressive pursuit of its commanding market share. It certainly will be interesting to see which retailers survive as we mourn the loss of others, including the recently announced closure of Toys R Us. Clearly those that survive will be the ones that quickly adapt to the changing needs of the consumer for, as one conference speaker said, “It’s not the strongest that survive, it’s those that adapt.”

With its enormous growth and impact on our lives, it’s hard to believe that e-commerce is still in its infancy. NAIOP will continue to help our members learn and capitalize on the opportunities that abound. A longtime leader in industrial real estate, NAIOP will host its annual I.CON: The Industrial Conference, June 8-9, in New Jersey. I invite you to join me there as we continue to examine e-commerce’s ongoing impact as well as many other drivers shaping the industrial markets.

NAIOP members, you’re able to access presentations and recordings from CRE.Insights: The Last Mile 2018 at naiop.org/lastmileresources18. 

Jim Neyer is executive vice president, real estate development, Al. Neyer, and 2018 NAIOP Chairman.