Outlook calls for strong demand for urban logistics, last-mile fulfillment

Accelerating e-commerce activity continues to spur demand for logistics services, especially in urban markets as retailers and others seek to put more products closer to end-consumers.

December research from commercial real estate firm Jones Lang LaSalle highlights these and other trends that have been growing since the spring, when the Covid-19 pandemic began to force more commerce online due to lockdowns, stay-at-home orders, and social distancing requirements. In its December Urban Logistics Snapshot, JLL found that e-commerce tenant demand has nearly tripled in 2020 and is intensifying the need for urban fulfillment centers. That is driving demand for more last-mile space and causing retailers and logistics providers to find innovative ways to deliver products. 

Key findings of the December research include: 

• This year’s unprecedented e-commerce activity is expected to continue. “We expect this trend to have a lasting impact on how people shop, with a continued increase in activity over the next few years for the e-commerce industry,” the researchers wrote. 

• Retailers and others are finding new ways to fulfill space needs. “In urban areas, we are seeing innovative ways to deliver products. To name a few: dark stores (shuttered retail spaces) are being converted to fulfillment centers; existing stores are adding fulfillment operations in their now less trafficked aisles; and delivery companies are considering lease terms as short as six months in retail spaces to gain any edge on delivery times,” they also wrote.

• Last-mile needs will continue to climb, especially in urban areas. “With the increase seen in e-commerce tenant requirements over the past year, coupled with the huge jump in the industry’s existing leasing activity, we expect the need for last-mile space to continue to rise, particularly in our urban logistics markets,” they wrote.

• Citing data from market research firm E-Marketer, JLL said it expects a “major shift in e-commerce purchases” for the upcoming holiday season, noting that U.S. consumers are expected to spend $190.5 billion this year on holiday e-commerce purchases, a nearly 40% increase from 2019.