E-commerce has taken over the retail landscape, resulting in logistics warehouses to use smaller or “light” warehouse facilities to increase delivery times and reduce costs. A report released by the CBRE Group, a leading commercial real estate firm, examined a national trend for smaller retail warehouse demand, with eCommerce warehouse facilities under 120,000 square feet in higher demand than ever before.
The researchers at CBRE found that warehouses between 70,000 and 120,000 square feet have seen a decline in available space by almost four percent. Rents have risen by over a third in the last five years. Meanwhile, vacancies for logistics warehouses over 120,000 square feet came in at over eight percent in the third quarter of 2019.
Why Are Companies Searching for ‘Light’ Retail Warehouse Facilities?
The creation and popularity of what the industry refers to as “last mile” distribution and fulfillment centers by large retailers like Amazon and Wal-Mart, designed to drastically cut delivery times using more localized logistics warehouses.
As customers got used to faster delivery times, it forced more retailers to take advantage of light warehouses more conveniently located in and around higher populated urban areas. The bigger retailers utilize several smaller facilities scattered throughout a metropolitan area rather than the traditional method of a large warehouse, distribution, and fulfillment complex in the outskirts of large metropolitan areas.
Rents have also jumped due to so much of the new warehouse construction completed in recent years that was designed for larger logistics warehouses. As developers look to build more retail warehouse facilities in heavier populated areas, they face more competition that in outlying areas from retailers, multifamily residential properties, and mixed-use developments. These will generate higher rents and more property tax revenue for the local government.
Higher Demand, Higher Rents for Smaller Ecommerce Warehouse Faculties
The combination of higher demand and fewer available properties in higher concentrated areas has resulted in higher rents for retail warehouse space. Higher rents and less availability have not deterred the rising demand, so it must still be a viable option to make a profit with a smaller, light eCommerce warehouse.
The retail sales industry will continue to be driven by the ease, convenience, and savings of e-commerce and online shopping. Distribution and fulfillment parameters are and will have to keep adapting to consumer trends and habits.
Technology to Continue Driving Retail Warehouse Design
As the technology continues to evolve, the design and function of retail warehouse facilities will need to adapt to take advantage of time and money-saving efforts through such upcoming trends as automation and artificial intelligence. Warehouse production activities will become more simplified and streamline to make maximum use of available space. The implementation of drones and GPS upgrades will make faster delivery an industry standard.
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