The imperative to provide speedy home delivery for e-commerce orders is driving demand for multi-story distribution centers in dense urban areas, despite the sky-high rents, panelists said Tuesday at the CSCMP Edge annual conference in Anaheim, California.
The high cost of real estate in cities compared to distant, rural areas had discouraged this trend until recent years, when the "Amazon effect" began to drive retailers to find ways to move their product closer to consumers, panelist Andrew Chung, CEO of Innovo Property Group, said in a session titled "Over-Simplified: Multi-Story and Urban Infill Distribution Centers—There's no Template."
In response, real estate developers are building projects that would have been inconceivable in past years, featuring truck ramps reaching second-story DCs and high-speed freight elevators to bring inventory even higher. Innovo is now developing two million square feet of such DCs in the New York City metro area, while fellow developer Prologis recently completed one in Seattle.
Warehouse designers must get creative to make these projects work, since there is no template for the best way to build a profitable, multi-story DC, the panelists said. In fact, Prologis refers to its nascent Seattle building as "an R&D project," panelist Kim Snyder, president of Prologis, said.
In addition to finding ways to help 53-foot trucks reach the second floor of an urban building, additional challenges include: packing enough inventory density into the space, providing rare parking spaces for warehouse laborers, and setting strict limits on delivery territory for each facility, the panelists said.