“It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.” – Charles Darwin
This quote shared by Gregory Healy, executive managing director, supply chain and logistics, Colliers International, is an apt way to sum up the conversation at the I.CON: Trends and Forecasts panel on e-commerce’s continuing impact on industrial real estate.
Bloomberg predicts that 10 percent of retail space in the U.S. will close in 2017 due to the shift towards e-commerce. But while retail store closures are increasing – 3,000 retail stores closed in Q1 of 2017, and we’re on pace to see as many as 8,000 stores close in 2017 – retail sales are going strong. It’s how the consumers buy the product that has changed.
“American spent $373 billion online shopping in 2016, and this is expected to grow to $530 billion by 2020,” said Michael J. McCrary, managing director, JLL. The burgeoning millennial population will reach 81 million by 2035. This group is widely utilizing “m-commerce;”in 2016, 63 percent of e-commerce purchases by millennials were made from their mobile devices.
The omnichannel retail approach is generating demand for new types of buildings (mega e-fulfillment centers, return processing centers, online food fulfillment, etc.) and e-commerce strategies (regional distribution, dedicated e-commerce, “ship-from-store,” “click-and-collect,” etc.). McCrary noted that JLL has seen e-commerce retailer leases grow from 15 percent of their big box leasing portfolio in 2014 to 30 percent YTD 2017. And e-commerce is significantly impacting industrial real estate design.
Blake Bearden, regional director, Bastian Solutions, shared a look “inside the box” at some of the new technologies being used in cutting-edge e-commerce distribution centers.
In traditional systems there can be a lot of dead vertical air space – what Bearden jokingly called “airhousing.” However, in today’s new fulfillment centers, goods-to-person automated systems effectively combat two of the primary issues in a warehouse: multiple “touchings” by workers that leads to order inaccuracies, and travel time when workers move from one area to another. Centers are utilizing “picker” robotics – which use long arms to select ordered items from the warehouse – or small mobile robots that move along the ground to deliver goods and therefore eliminate the need for worker interference. “These systems are very scalable, and can grow to increase throughput as the client grows,” Bearden added.
AutoStore technology uses automated warehouse robots that travel across a Rubik’s-Cube-type structure to pull merchandise down for orders, allowing for greater density of storage than traditional picking systems. The robots retrieve orders in advance and queue them up for associates to complete. “Orders are picked, packed and shipped with a high level of accuracy within 15 minutes to meet the demand of next-day or same-day delivery,” said Bearden.
Following Darwin’s advice, these distribution models are adapting rapidly to meet the demands of the consumer: make it faster, cheaper and better.
Brielle Scott is Senior Communications Manager at NAIOP.