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Category: Supply Chain Trends and Issues

When it Comes to Distribution Centers, eCommerce – What Else – is Driving the Market


From Continued Major Absorption of Warehouse Space to Small, Automated Urban DCs, Companies to Invest in eFulfillment

Nov. 11, 2020
SCDigest Editorial Staff

The coronavirus pandemic didn't slow down the market for warehouse space in the US Q3, as the demand for space to support ecommerce order fulfillment remains high.

Supply Chain Digest Says...

The key to success for Fabric, AutoStore, Alphabot and others is storing the products in spaces only robots, not humans, can reach, driving storage density.

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That according to a recent report from real estate firm JLL, which says "The logistics sector continues to benefit from the huge shift in on-line buying."

As a result, "rents continue to climb, annual absorption is on track to close at 200 million square feet, and deliveries hit an all-time high" in Q3, JLL says.

There has been 71.3 million square feet leased for efulfillment through the end of Q3, JLL data shows, though the rate of growth slowed a bit in the quarter. Ecommerce absorbed 15.3 million square feet in the third quarter, compared to about 31 million square feet in Q2, despite the biggest drop in quarterly GDP in US history in the quarter.

A total of 14 million square feet of industrial space was leased in Q3, with the 15.3 million of ecommerce space leading the way. That was followed by non-ecommerce logistics and distribution (14.3 million square feet), and 3PLs and traditional retail (both at 7.1 million square feet).

And developers keep building, with deliveries hitting a record high in Q3, with completions totaling 97.4 million square feet.

The top markets of Inland Empire, Dallas-Fort Worth, Eastern and Central Pennsylvania, New Jersey, Chicago, and Houston contributed almost 46.1 million square feet of new projects delivered the quarter.

JLL says average asking rent in the industrial market was $6.31 per square foot at the close of the third quarter, with annual rent growth at 4.2%. However, rates differ dramatically across individual markets.

Markets with significant quarter-over-quarter rent increases included North Bay, Michigan, Cleveland, Charleston and Long Island, JLL reports. Although many landlords are holding rents firm, in some markets, concessions have been increasing in the form of broker incentives and more free rent, to entice tenants as they wait for impact of the pandemic to be realized.

A snapshot of key warehouse Q3 market data from JLL is shown below.



Source: JLL

Meanwhile, the Wall Street Journal reported recently that there remains lots of action in the market for small urban warehouse space, with efulfillment, increasingly supported by automated order picking systems in what is often called "microfulfillment" technologies

(See More Below)




The Journal article describes a 7500 square foot urban warehouse being constructed in Brooklyn by a U.S.-Israeli robotics provider named Fabric, which uses robots on a grid to pick orders. The company has plans to run the facilities and others it is constructing for multiple retailers.

"We're looking at a very small number of people," Fabric CEO Elram Goren told the Journal. A smaller system in Tel Aviv with four operators can process as many as 1,000 orders a day, he said.

The key to success for Fabric, AutoStore, Alphabot and others is storing the products in spaces only robots, not humans, can reach, driving storage density.

Grocery installations include three different sections: one for ambient-temperature products, another for refrigerated SKUs, a manual picking area for fast-moving goods.

eCommerce continues to fuel massive investments in space and systems.

Any reaction to these warhouse market trends? Let us know your thoughts at the Feedback section below.




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