SCDigest has reported a few times over the last couple of years on the still very nascent trend of development of multi-story distribution facilities in the US.
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Such facilities are relatively common in Asia and to a lesser extent in Europe, but abundant and comparatively cheap land in most markets has served as a barrier to the idea in the US, given that multi-level DC operations have some inherent inefficiencies versus their single story compatriots.
In 2017, for example, we reported that warehouse developer Prologis had broken ground on a new 590,000 square-foot facility that was to have three levels and be located two miles from the Port of Seattle and five miles from Seattle's downtown.
The driver? What else but ecommerce, with the need to be close to population centers, while available real estate in some market such as Seattle is increasingly difficult to find. Other multi-story DCs are under development in the New York City area.
By comparison, Prologis says it has developed more than 50 multi-story facilities in Japan and China. (See More Signs that US Distribution Centers May Go Multi-Story.)
In April, Amazon announced that it was extending the free shipping service it offers its Prime member from two-day to one-day. Amazon spent about $800 million in Q2 alone to enable the program, which it is rolling out in phases across the US. Others etailers are developing similar capabilities.
Now, Prologis has announced it has some clients for its Seattle area building – and naturally enough, one of them is Amazon.
Amazon is taking three floors and about 500,000 square Prologis space, while Home Depot has plans to take almost 100,000 square feet, according to the Wall Street Journal.
Also earlier this year, Home Depot announced it was developing some 170 fulfillment centers in major US markets to stock high velocity SKUs and perform crossdock operations, a plan it said would allow the company to provide same day or next day deliveries to about 90% of the US population.
You just can't achieve those kinds of rapid deliveries, sometimes executed in a matter of hours, from distribution facilities too many miles out of town.
As a result, "You have to go vertical because you can't find a 50-acre space in the middle of a city close to the customer," said Hamid Moghadam, CEO of Prologis, told the Wall Street Journal.
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To maximize efficiency at what it calls the Georgetown Crossroads, Prologis has installed freight elevators capable of carrying forklifts, and a ramp that enables trucks to directly to loading docks on the second floor to minimize material handling delays. (See graphic below).
The new facility's first two floors are like warehouses stacked on top of each other, connected by a ramp to loading docks and a staging area. The third floor was designed for offices and light manufacturing, and is accessible by both freight and passenger elevators.
Developer interest in multi-story DCs is strong because they may be able to charge premium lease rates versus traditional space due to the location benefits – and high construction costs. Asking rents at the Prologis facility are said to be 15% to 30% more than rates for traditional one-story DCs in the out Seattle area.
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