Industrial real estate capacity has been at near-record lows in recent years as e-commerce and more niche trends like online grocery delivery continue to drive demand for warehousing and distribution space in primary and secondary markets. The COVID-19 pandemic has only exacerbated this problem by slowing industrial construction projects intended to provide additional capacity. Meanwhile, e-commerce of all sorts is seeing an uptick in demand as consumers do their best to stay at home.
High Demand, Low Capacity
While many industries are struggling, most predictions show that industrial real estate should weather the current pandemic fairly well. Online retailers are expected to maintain a good portion of the market share they have gained as consumers continue to social-distance beyond the expiration of official stay-at-home orders. The ongoing potential for additional waves of coronavirus also drives an increased need for e-commerce businesses and multichannel retailers to shore up their supply chain capabilities in key markets sooner rather than later.
With new construction delayed and existing space occupied, businesses must think outside the box to ensure they have appropriate distribution space to meet growing demand. Even before the pandemic, some logistics stakeholders had begun to see the value of refitting existing industrial and commercial space for use as warehouses and distribution centers.“The benefits of repurposing older buildings as new, utilitarian spaces are multiple and undeniable,” says Frank P. Crivello, Chairman & Founder of Phoenix Investors, Phoenix Logistics’ affiliate. Now, that trend seems almost prophetic as unoccupied commercial space becomes available as the result of retailers of all sizes shuttering stores to cut costs. Here are six tips for converting non-traditional space or non-industrial buildings into distribution space:
- Consider size and volume. A full-sized distribution center isn’t always necessary—sometimes a micro-fulfillment center stocked with high-volume goods is enough to alleviate supply chain stresses. Similarly, multiple smaller facilities may work in place of a single larger facility. If demand may be temporary, starting with a pop-up facility might be best. Don’t be afraid to get creative to meet the demands of your customers.
- Respect your neighbors. Traditional warehouse space is often located in isolated areas or industrial parks where issues like noise and traffic have a minimal impact on the community. If you adopt an unused retail store for your distribution needs, make sure you take steps with respect to its location so that residential and commercial neighbors don’t push back against your presence. Considerations may include strict delivery scheduling to avoid traffic pile-ups or limiting outdoor operations during off-hours.
- Look up. The traditional DC typically has an expansive footprint, but a pop-up DC or converted commercial building may not. It’s important to think three-dimensionally when sourcing space for on-demand warehousing. Don’t forget you can often build up as well as out.
- Don’t be afraid to share. It’s possible that traditional DCs or warehouses are fully leased but not fully used. This may be doubly true for retailers and manufacturers of non-essential goods who have canceled inventory orders but are still on the hook for unused space during the pandemic.
- Close is for horseshoes and distribution activities. Even if you can’t access primary market space, often a nearby secondary market exists that is well-suited to your needs. For example, a warehouse in Milwaukee can still easily deliver to the Chicago market with short lead times. It isn’t always necessary to be directly in the market; most of the time five or six hours away is close enough.
- Ask for help. Find a logistics partner with experience locating and adapting unused buildings for distribution. This will avoid mistakes, shorten the timeline to facility activation, and ultimately reduce overall project costs.
Get Help From Phoenix Logistics
As an affiliate of the real estate firm Phoenix Investors of Milwaukee, WI, Phoenix Logistics has unique and preferential access to an expansive portfolio. Phoenix Investors’ Senior Management includes Frank P. Crivello as Chairman & Founder; David Marks as President & CEO; and Anthony Crivello as Executive Vice President. Robert Kriewaldt serves as Phoenix Logistics’ Senior Vice President. At Phoenix Logistics, our portfolio of warehousing and distribution space spans 22 states. We specialize in locating unused buildings and converting them for logistics uses. We have rapid response teams available to activate new locations quickly for our customers. If you need help quickly to meet your growing demand, please contact us today.