TRENDS IN INDUSTRIAL WAREHOUSE & DISTRIBUTION DEVELOPMENT
While demand for industrial warehouse and distribution space is not expected to match the record-setting highs seen over the past two years, it will likely keep up with supply as vacancy rates are expected to remain low throughout 2023. Higher interest rates may affect some developers and end-users that would otherwise be looking to expand, causing a decrease in new construction starts. However, major players with financing ability will most likely remain active to keep up with steady consumer spending and in preparation for economic recovery. Demand will largely be driven by e-commerce, third-party logistics and parcel delivery, and large traditional retail users looking to expand their distribution networks nationwide.
As the nation’s largest builder of distribution and warehouse space, ARCO offers the experience and expertise needed for a seamless design and construction process. ARCO is unique in that we offer preliminary design at no cost to our customers to remove the risk of substantial upfront costs. Our design-build delivery method addresses ongoing market challenges through integrated design and construction solutions that allow for early material procurement resulting in reduced risk and shorter project durations.
INDUSTRIES DRIVING DEMAND
Although e-commerce growth has normalized since spiking in response to COVID-19, it continues to grow at a pre-pandemic pace with the share of retail purchases made online compared to in-store increasing. Because of this, in 2023, online retailers can be expected to continue seeking strategic industrial facility sites close to consumers and growing MSAs with large industry players at the forefront.
Under Construction: 1,215,169 SF build-to-suit distribution facility for an industry-leading, Fortune 500 online retailer
Additionally, online and traditional retailers looking to improve efficiency in their supply chains are turning to third-party logistics and parcel delivery providers such as ARCO repeat clients DHL, UPS, and FedEx. Third-party logistics and parcel delivery was one of the most active industries in the U.S. last year and is expected to continue driving demand for industrial space in 2023. With services such as warehousing and fulfillment operations highly sought after, it is expected that many players in the industry will seek to expand their networks nationwide. However, because of land constraints, expansions may occur beyond major metro areas in growing secondary markets.
Recently Completed: 150,000 SF distribution facility for Marcus Partners and UPS
Recently Completed: 337,000 SF distribution facility for Jones Development and FedEx Ground
In addition to e-commerce and third-party logistics and parcel delivery, large-scale traditional retailers are also expected to drive demand for industrial space in 2023. Along with mass merchandisers, consumer trends are driving growth for other traditional retail categories such as home furnishings and improvement. This category will most likely account for the majority of big box distribution construction in 2023 with most developments being build-to-suit.
Under Construction: 1,300,000 SF distribution facility for an industry-leading home improvement retailer
MITIGATING ONGOING MARKET CHALLENGES
While pricing for many major commodities began stabilizing at the end of 2022 and major spikes seen in response to Covid-19 are not likely to occur, supply chain disruptions are expected to continue impacting construction material lead times in 2023. Because of this, partnering with an experienced contractor that utilizes a design-build approach is critical to avoiding major schedule delays. On a broad scale, design-build delivery is beneficial from both a cost and schedule standpoint as an integrated approach like ARCO’s consistently results in the most functional solution and tremendous time savings.
With preliminary design completed internally during the proposal phase, immediately upon project award, full design and buyout can begin simultaneously. This, combined with ARCO’s national buying power, allows for the purchase of long lead time materials such as structural steel, roofing, HVAC equipment, mechanical equipment, electrical switchgear, and dock equipment well before mobilization resulting in significant overall schedule savings.
Additionally, beyond the benefits of our design-build delivery method, ARCO is expertly capable of identifying the critical path and implementing strategic measures and proactive solutions to avoid any unforeseen delays and expedite the overall project schedule.
ARCO recently completed a 464,000 SF automated distribution facility for Scannell Properties and a confidential Fortune 500 athletic apparel and footwear retailer in Reno, Nevada! Although construction took place throughout winter, ARCO delivered the project within an accelerated schedule of just 8 months.
EXPERIENCE A BETTER WAY TO BUILD
With more than 5,000 successful projects spanning 48 states in our portfolio, ARCO has developed the industry-specific expertise it takes to provide the best, most cost-effective, single-source solutions and add value to every project.
Contact our team of design-build experts to discuss solutions for your facility needs.