5 FACTS ABOUT CONSTRUCTION IN THE FIGHT FOR LAST MILE DELIVERY SPACE
As e-commerce continues to grow at a staggering rate, the demand for logistics real estate has followed suit. Retailers are seeking opportunities to add regional and last mile distribution facilities into their supply chain but face low vacancy rates and stiff competition for premium locations. Partnering with the most qualified design-builder will be critical to successfully addressing complexities that can be present when proximity is of utmost important. ARCO is expertly capable of solving our customers’ most demanding challenges from zero lot lines and brownfield remediation to reconfiguration of existing facilities including, less traditional options like retail.
1. CHALLENGING SITES ARE THE NEW NORM
From a spike in online sales to same day delivery expectations, consumer preferences have made site selection more important than ever before.
Over the past decade, consumer shopping patterns have made a substantial shift from brick-and-mortar stores to favoring online platforms. This already fast-growth industry has been bolstered dramatically in the past year due to the COVID-19 pandemic and its effect on buying behavior. In addition to the increase in online purchases, the demand for same day delivery is also on the rise.
This new normal might be good for online business, but it presents a unique challenge in the realm of logistics. Prologis estimates that e-commerce requires 3 times the space that traditional distribution does – space that is not always easy to come by, especially in land-constrained markets near population centers where last mile facilities are needed.
As both traditional and online retailers continue to find ways to meet customers quick turnaround expectations, the demand for last mile facility space will continue to rise and previously undesirable sites will become in high demand.
Brownfield sites like this once shuttered steel mill are being transformed into major distribution hub. Show here: 4.5 million square feet completed by ARCO for TradePoint Atlantic in Sparrows Point, Maryland.
2. COMPETITION FOR PRIME LOCATION CONTINUES TO RISE
As one of the largest industrial builders in the U.S., ARCO has supported the needs of major e-commerce players since the rise of online shopping. Each year, our customer base seeking to improve their delivery infrastructure has increased and never more than throughout the past year.
Logistics providers supporting Fortune 500 CPGs are increasingly neighboring suburban developments. Shown here: 2 million square feet for DHL in Ft. Worth, Texas.
In the past, online retailers could operate outside of suburban areas and comfortably outperform the competition when it came to delivery. With same day delivery and pickup options the new norm, now, that is not the case. Constructing warehouses in neighborhoods long populated with car dealerships, fast food joints, shopping malls, and big box stores in order to get as close to large populations centers as possible is becoming increasingly necessary. The repurposing of existing retail space may be one way for developers and owners to address the significant growth in demand for industrial distribution space.
3. TRADITIONAL RETAIL MAY HAVE A ROLE TO PLAY
Abandoned brick and mortar retail facilities have been considered by developers and owners searching for last mile industrial space due to enticing locations and large footprints.
While it is an uncommon solution compared to traditional industrial development and construction, a number of retail-to-industrial property conversions have happened across the U.S. Abandoned retail properties are enticing to developers and owners looking for warehouse space for numerous reasons, the most prominent being location. These sites are usually located within population centers and near transportation infrastructure like major highways, making them logistically ideal. Many retail structures, especially stand-alone facilities, also boast features that seem compatible with industrial use including multiple dock doors, abundant parking, and clear height. For structures with poor reconfigurability but prime location, demolition and construction of a ground up facility can offer the best of both worlds.
Repurposing a facility may sound like a workable solution for developers faced with vacant property, but, converting retail space to industrial is extremely complicated and most often cost prohibitive. In all circumstances, evaluation of retail to industrial conversions requires a highly experienced and skilled contractor.
Developers interested in retail to industrial conversions should consider the following:
Last mile facilities require adequate space for state-of-the-art pick and sorting systems. Shown here: the second floor mezzanine of a sort system for OnTrac in Reno, Nevada.
4. CHALLENGES MUST BE ADDRESSED IN THE UPFRONT
Last mile facility construction requires an experienced contractor to address complicated sites, accelerated schedules, and municipal hurdles.
As consumer trends and increased competition continue to drive demand for last mile space, construction is becoming increasingly more challenging. Because ideal locations for last mile facilities are typically located in areas not condusive to industrial development, understanding of a site’s potential complications is imperative. Additionally, when it comes to last mile facility construction, time is a valuable and limited resource, as retailers are looking to build out their infrastructure quickly, making accelerated schedules a requirement. Exceptionally long permitting processes, unusual code requirements, and sites with bad soils are just a few challenges that, if not addressed in the upfront, have the potential to cause detrimental schedule and budget issues.
While the challenges associated with last mile facility construction can seem overwhelming, they can be overcome by partnering with a contractor that is actively engaged throughout the design and earliest stages of a project. In order to be successful, a contractor must perform comprehensive due diligence in the schematic phase and have the experience and expertise to present alternative solutions that address the big problems that could otherwise delay or even derail a last mile project.
Shown here: A 165,000 SF Furniture Distribution Facility built for Georgia Furniture Mart in Tucker, Georgia.
5. ARCO IS THE RIGHT PARTNER FOR SUCCESS
From methane gas mitigation on a former landfill to a million square feet built throughout winter in just 11 months, ARCO is expertly capable of solving the most difficult problems our customers face.
When it comes to last mile facility construction, partnering with the right contractor can make all the difference. ARCO is uniquely capable of providing solutions to challenging last mile projects from brownfield site development to retail-to-warehouse conversions and everything in-between.
ARCO’s extensive preconstruction services address challenges associated with last mile facility construction from the beginning. At no cost to our customers, we perform extensive analysis on all site considerations including zoning restrictions, infrastructure, utilities, and overall suitability for development to help empower clients to select the best possible location for their facility.
With more than 175 million square feet of industrial construction under our belt, ARCO’s industry knowledge and expertise also allows us to provide creative solutions and alternatives needed to make even the most complicated last mile facility projects feasible, ensuring each facility is delivered on time and on budget. Our unique design-build approach means that we work directly with the architect to ensure feasibility and design efficiency, and all decisions can be made with full knowledge of their impact on cost and schedule. This comprehensive approach yields an average overall delivery speed 33% faster than that of traditional plan-and-spec construction and can help cut down on the longer than average time frame a last mile facility project may present.