TRENDS

The "last mile"

Impact of COVID-19 on Supply Chain Logistics and Industrial Real Estate

Consumer demands are becoming more sophisticated and complicated during a time when the nation is under a pandemic and the rules are changing, which, in turn, is putting increased requirements on the transportation of goods. Multiple purchasing sites are available – not just Amazon – faster shipping, free returns, some places who no longer accept returns due to COVID-19, a shortage in inventory due to high demand of products, all at a lesser cost, are examples of benefits and issues customers are increasingly expecting. Not only is the overall demand for goods shipped by trucks increasing, but the multiplicity of shipping service companies and consumer expectations are also becoming more complex.

All business sectors are feeling the effects of customer demands, as they substantially shape the shipping of physical goods. The transportation conditions within different regions can vary greatly, therefore demanding a unique supply chain strategy in every region that a company may do business in. The underlying factors from a real estate standpoint are: are where the product originates, where it’s being delivered and cost. This becomes critical in your operating business model.

One of the most complex and expensive components of the supply chain of retail is the “Last Mile,” representing the last and final leg in the process of transporting goods to a consumer. The most inefficient and expensive leg of the journey is the transfer of goods to the distribution center. It’s currently estimated that over 50% of supply chain costs are attributed to transportation. Rent only accounts for 4% of costs and can vary depending upon the decisions made around transportation models. Choosing an industrial facility or third-party logistics (3PL) company to house its goods has become one of the most important decisions a company can make. In order to make informed decisions to support the best logistics model for your business, valuable information relating to industrial warehouses and the primary mode of transportation infrastructure (highways) for transferring goods are critical factors for consideration.

The “Last Mile” is all about greater efficiency: better, cheaper, faster. Retail is forcing other e-tailers to keep up or lose market share. New creative ways are being implemented to reduce last mile costs through flex, return partnership and slower shipping options. Prime Now facilities are now smaller and located in urban areas. E-commerce is still a new concept to people, accounting for 70% of market penetration in the United States, but more e-commerce is on it’s with 55% expected growth increase over the next 4 years. Is our infrastructure prepared for this growth? What are the new considerations for industrial real estate? Network optimization is the most effective way of lowering external logistics costs. Research shows the U.S. to spend $2.4B of its GDP on infrastructure. Crumbling bridges, heavy traffic, crowded airports and highway erosion attribute to $3.9T loss in GDP.1

COVID-19 has not impacted the functionality of the warehouse. There are more e-commerce requirements but the architecture that is being placed into the office design is going to change rapidly. These changes include: a transition from low cubicles to higher cubicles/offices and reducing the amount of density. Spatial design is going to be a key element when considering layout options. A growing trend has also been the number of amenities that tenants desire within the building in the case of a build-to-suit, including: additional parking, fitness areas and break rooms that exit into large outdoor areas.

Density of Facilities

Height is critical, not just 32’, but multi-story warehouses. E-commerce facilities require up to 3x the density of traditional warehouses, as it is more of a volumetric analysis as well as providing as much flexibility for conveyor systems. There is a greater quantity of SKUs and more expensive urban locations (see: New Seattle Prologis 3-story warehouse and new Bronx 3-story warehouse). Naturally, higher is the trend as the cost of real estate in urban cores is so much more expensive. More dock doors are designed for smaller delivery trucks. Also, 24-hour access entail more security features to implement in the design. Less depth, faster turns and more associate parking are also required. How do you manage the cost? Take shorter distances from warehouses to customers; reduce delivery time/man hours; use smaller/lighter boxes when shipping; and utilize existing distribution networks.

For more information or to schedule a presentation with one of our industrial subject matter experts, please click on their name in the People section below.

1: Healy, Gregory. “Critical Components of Last Mile Transportation.” NAIOP CRE.Insights The Last Mile. 5 Mar 2018. https://www.naiop.org/en/Research-and-Publications/News/NAIOP-News/2018/Last-Mile-Resources

PROJECTS

conn's distribution
center

Conn’s Distribution Center is a 656,000 sq ft. warehouse (582k sf) and office build out (75k sf) for the national retailer. The building is situated on just over 36 acres and offers easy access from the Hardy Toll Road. It serves as a warehouse, distribution center, clearance and customer pick-up center. The state-of-the-art cross-dock distribution facility is 500 feet deep with 36-foot clear height. Ensuring maximum efficiency, it includes 65-foot speed bays, 140 dock doors and a queuing lane for ease of truck loading and parking.

shockey berkeley

Made up of insulated, precast panels, this speculative warehouse building stands tall with
36’ clear height, 13’ wide dock panels, and 8’ wide panels typically. For flexibility, the dock
side of the building intermittently includes knockout panels for additional dock door openings.
Clerestory windows dot the long sides of the building allowing the entrance of natural light. The
main entry features structurally hung precast panels to allow uninterrupted glass lines and a
canopy. Totalling 402,000 square feet, it features a main office space, driver check-in office,
battery charging area, satellite restrooms, and infrastructure for additional office space, driver
check-in office, and dock equipment. For fire protection, the risers are protected with bollards
throughout and a separate pump house outside of the building is provided helping maximize
uninterrupted square footage.

swire coca-cola

Renovation of an existing dilapidated steel building on an existing SWIRE Coca-Cola campus in Denver CO. The existing structure was retrofitted with new energy efficient insulated metal panel envelope to bring the existing building up to code. New restroom facilities were added as well as new dock well for shipping and receiving. The renovated facility will be equipped with and ESFR fire suppression system and will be utilized as a storage and distribution facility with high pile storage capabilities.

cohen's distribution center

Cohen’s new distribution center and regional offices are located in Donovan’s Industrial Park in Mount Pearl, Newfoundland. The site is centrally located with easy access to regional highway networks.

The building combines a large furniture distribution warehouse with a two-story office building as the main head office. The warehouse is a pre-engineered steel construction allowing for maximum flexibility within its interior, while the exterior is covered in white steel cladding. The office building at the front is covered in curtainwall glazing combined with black aluminum panels contrasting with the white steel warehouse. This stark contrast in color highlights the different functionality of the back and front portions of the building.

The entrance is slightly off-center highlighting the asymmetry of the main facade. The main design feature in the building is the corner staircase lit by a large glass curtainwall accentuating the main corner of the building.

PEOPLE

nazir khalfe, aia, riba, rid

Nazir Khalfe, AIA/RIBA, is a Principal for Powers Brown Architecture. Nazir spent more than 10 years of his career as a project manager in the Houston, Austin, San Antonio, Denver, and Washington, D.C. markets. Completed projects include industrial and office master plans, as well as spec office buildings, corporate office buildings, and distribution, assembly, and manufacturing facilities. Nazir has demonstrated the ability to design and document buildings that are attractive, economical and durable. Evidence of his ability to develop designs that are efficient and cost-effective can be found in the numerous projects completed for his repeat clients. Nazir is particularly focused on balancing project budget issues with durability and quality.

bryant mazzetti, aia

Bryant Mazzetti, AIA, has 15 years of architectural experience in the commercial real estate industry. Bryant has managed millions of square feet of projects ranging from tenant improvements, speculative housing and office developments, to large-scale logistical and manufacturing parks, including one of the largest industrial facilities in the Rocky Mountain Region. Well-versed in commercial growth trends, Bryant aids clients in managing strategic decisions for projects ranging from initial cost and feasibility, to exit strategy implementation. These efforts help clients realize their potential with a balanced project budget approach and high quality marketable design.

reinaldo venancio

Rey Venancio, LEED AP, is a Principal for Powers Brown Architecture. Rey executes design concepts for various project types and scope. He is heavily involved in preparing and presenting design proposals to clients and producing detailed drawings for pricing packages and participating in design development phase. Rey also interacts with contractors and consultants and is involved with the projects into construction phase.

madelena cheung, OAA

Madalena Cheung, OAA, RAIC is a Senior Architect at Powers Brown Architecture. She handles projects in a number of provinces within Canada. Project sizes range from 5,000 sf interior fit ups to 230,00 sf industrial projects. Madalena has worked on various project types including commercial retail, corporate office buildings, mixed use, healthcare, cannabis grow facilities, distribution centres and industrial warehouses. With 10 years of professional experience, Madalena is a project Architect with strong attention to detail and a proven ability to successfully lead large collaborative teams towards clearly defined outcomes and deliverables in a timely manner. She focuses on balancing project budget issues with durability and quality. Madalena builds and maintains strong working relationships with her clients. Madalena is knowledgeable in building codes and zoning requirements over various provincial jurisdictions. She has strong interests in accessible and inclusive design that is demonstrated clearly in the creative design solutions she brings to the table. She is well-versed in BIM and constantly maintains compliance with detail standards & document control/ production standards.

Contact us