In E-Commerce, Retail and Industrial Merge

WASHINGTON, DC—In the world of e-commerce, the need for integration between retail and logistics channels has never been more acute. Accordingly, amid the strong growth of the online sales channel as well as omni-channel sales, retail and industrial real estate are converging: a white paper from the NAIOP Research Foundation says manufacturers, transportation providers, distribution and fulfillment center operators and retailers alike are working to change the retail logistics chain.

“For commercial real estate, the lines are blurring between industrial and retail,” says Thomas Bisacquino, NAIOP's president and CEO. “Some retailers are directly developing and operating their own technology platforms, logistics and distribution facilities, and others are outsourcing all of these functions. Still others are taking a hybrid approach, keeping some tasks in house and outsourcing others. It's fundamentally shaping the way both retailers and industrial create work spaces and workplaces.”

Titled “The Promise of E-commerce: Impacts on Retail and Industrial Real Estate,” the white paper was written by Curtis Spencer, president, and Steve Schellenberg, VP, with Webster, TX-based IMS Worldwide. The authors chart the ways in which retailers have adapted to meet today's consumer expectations, which call on retailers to have product on shelves for instant purchase as well as within distribution centers for direct customer delivery. They're aligning their fulfillment commitments, sales and inventory tracking processes, and real estate strategies by focusing on information technology, operations and site selection.

On last this point in particular, Spencer and Schellenberg write, “More companies today are factoring their promises for fast delivery and 'click to knock' strategies into their commercial real estate strategies. The boom in e-commerce has created significant demand for new industrial space, often in markets based on population and Internet usage, rather than store replenishment requirements.”

These next-generation facilities, “vastly different from traditional distribution centers that only support regional sales replenishment,” are being developed expressly to support high-volume package through-put. “They require higher ceilings, more parking, additional dock doors, restrooms and mezzanines with greater density of floor space for picking,” the authors write. “When selecting a site for new industrial space, companies are also seeking a location near major airports, waterways and ground transportation networks for efficient shipping of goods and close to mass transit so their employees have easy access to and from work.”

Broadly, retailers are employing alternative strategies for fulfillment that consider the delivery time frame and the lowest-cost shipping method, including using shelf inventory for local fulfillment or shipments to stores or fulfillment lockers for customer pickup. Brick-and-mortar locations of retailers like Macy's and Walmart now use retail space for order picking, packing and shipping.

With 11.1 billion square feet of industrial space within 69 major metropolitan markets, demand for as much as 80 million additional square feet could emerge from users seeking e-commerce and mega-bulk distribution space, according to the white paper. Parallel demand is expected for parcel hubs, delivery centers and local, urban logistics depots that support fresh-food centers and same-day delivery services.

“The Promise of E-commerce,” which illustrates its points with numerous case studies, was funded and published by the NAIOP Research Foundation. It's available for complimentary download by clicking here.