From light-industrial properties to large multistory facilities, the urban logistics real-estate landscape is changing as shippers get a handle on the best warehousing strategies to tackle their "last-touch" challenges.
Victoria Kickham started her career as a newspaper reporter in the Boston area before moving into B2B journalism. She has covered manufacturing, distribution and supply chain issues for a variety of publications in the industrial and electronics sectors, and now writes about everything from forklift batteries to omnichannel business trends for DC Velocity.
The push to get products closer to consumers is changing the logistics landscape, especially in densely populated urban areas where congestion, limited space, and high real-estate prices make it difficult to tackle last-mile delivery challenges. Despite the obstacles, trends are emerging in the commercial real-estate market that highlight two very different approaches to urban warehousing and fulfillment on the rise today: increasing interest in larger, multistory facilities that leverage advanced technology and vertical space configuration, and growing demand for small, light-industrial properties of less than 120,000 square feet. Although the approaches are different, the end-game is the same: to meet increasingly fast delivery expectations in the most efficient way possible.
"Delivery is the 'new wave' for fulfillment," Andrew Chung, founder and CEO of industrial developer Innovo Property Group (IPG), explains, emphasizing the effect of e-commerce on the warehousing and logistics landscape. "It's kind of like how Amazon changed the way that people shop. Now, [e-commerce is] changing the way that goods get delivered. [And] that's changing the infrastructure in general."
The development of a handful of high-profile multistory warehouses in large urban markets combined with a tighter market for light-industrial properties offers a glimpse of the evolving marketplace.
MULTISTORY'S MOMENT
IPG is developing a large multistory last-mile facility in the Bronx to help shippers meet e-commerce delivery demands in the New York City area. Slated to open in 2021, "2505 Bruckner" is one of a few big projects making industry headlines as the race to conquer urban delivery heats up, and Chung says the unique facility represents a transformation of the supply chain.
"In logistics, it's all about how long it takes to get from one place to another," Chung says, pointing to the cost advantages and efficiency of delivering more products to urban populations from a single, centralized location. "Supply chains need to be adjusted for the new way that goods are being transported and [orders] fulfilled to customers."
For Chung and others, multistory makes the most sense for meeting those demands. The 2505 Bruckner facility will be situated on 20 acres in the Bronx, at the intersection of five major truck routes that can access more than 9.4 million people in a 15-mile radius, reaching consumers in Manhattan, Queens, Brooklyn, Long Island, Westchester County (New York), and Connecticut. The 980,000-square-foot building is being developed on a large site that previously housed a dilapidated movie theater, a unique opportunity in an urban setting, Chung admits, noting that "such a large tract of land in an urban environment is virtually impossible to find."
The design features a two-level structure built to meet the needs of a modern warehousing and fulfillment operation, with ceilings that can accommodate modern vertical racking systems—up to 32-foot heights—and truck and trailer access on both levels. Ramps will allow delivery trucks to access an elevated truck court on the second level, for instance. Ample parking is another key benefit; the site will include eight trailer parking spaces, 125 box-truck parking spaces, and 730 car spaces.
IPG is set to break ground on the facility this year and has two other such projects in the works. Running roughly 12 to 18 months behind the 2505 Bruckner schedule, IPG's two additional multistory facilities will be located in Long Island City, New York.
Melinda McLaughlin, head of U.S. research for logistics real-estate development firm Prologis, agrees that there is a growing need for modern high-tech facilities in urban areas as supply chains shift, and she says new development and reuse of existing facilities will continue. Prologis opened "Georgetown Crossroads," a 580,000-square-foot three-level facility, in Seattle in 2018 to serve city distribution and last-mile delivery needs in the region. The facility was the first modern multilevel industrial facility of its kind in the United States—featuring truck access ramps and forklift-accessible freight elevators to reach the upper levels. Prologis also renovated a retail site and redeveloped it as "Prologis Bronx," a smaller-scale, two-story facility being leased by Walmart e-commerce subsidiary Jet.com.
"Modern properties [in dense urban areas are] very rare, but we've seen some really strong demand for those properties as supply chains get closer to end-consumers," McLaughlin explains, adding that the benefits of a large modern facility that can easily reach millions of people can outweigh the associated higher real-estate costs. "The functionality they can bring is increasingly valued."
SMALL IS IN DEMAND
Last-mile facilities (or "last touch," as Prologis refers to them) in urban areas tend to be located in smaller, older buildings, and even those that are "less functional" are nevertheless in demand because they are the best place to service the urban end-consumer, McLaughlin explains. The market is seeing high demand, limited new supply, and strong rent growth for such facilities.
A report from commercial real-estate firm CBRE showed that demand for "well-located, small light-industrial properties" continued to outpace demand for larger warehouses during the first half of 2019, for instance. The firm found that urban facilities with 70,000 to 120,000 square feet remain in high demand because of increasing economic activity, urban population growth, and consumers' same-day delivery expectations. The availability rate for such facilities has dropped by nearly four percentage points to 7.4% over the past five years, the firm said, while their rents have climbed more than 30%. In comparison, warehouses of more than 250,000 square feet saw rent growth of 16% during the same period. CBRE said strong demand for smaller warehouse properties will continue "as retailers and logistics operators expand their networks to increase their proximity to consumers."
NEW TERMS FOR NEW TIMES
Logistics real-estate development firm Prologis has created a model designed to develop a common language to talk about the different functions buildings play along the supply chain.
In the meantime, the shifting landscape calls for a new way of defining logistics real estate, according to McLaughlin—one that creates a clearer picture of the different types of facilities companies are using to meet changing service-level expectations. Prologis has created a model of what it calls "the modern supply chain" that goes beyond traditional property definitions such as "warehouse/distribution" and "flex" to identify facilities based on where they are used, how they are used, and what they look like. The goal is to develop a common language and a standardized way to talk about the different functions buildings play along the supply chain, she says. "Last touch" is one of four categories the company has developed; the others are "city distribution," "multi-market," and "gateway."
As McLaughlin explains, the Prologis model defines the four types of logistics properties as follows:
"Last-touch" properties can reach large, dense, affluent populations within hours. These buildings typically are the oldest and smallest, because they are in infill locations.
"City distribution" properties are well-positioned to provide one- to two-day shipping to an entire large market. These buildings tend to be small to mid-sized and located in urban areas.
"Multi-market" distribution" facilities must have the right balance between location and functionality. These buildings tend to be newer and larger as well as located at key transportation hubs at the periphery of major urban areas.
"Gateway" facilities are multi-market buildings that incorporate access to major sea and intermodal ports.
In addition to creating a common language, the framework helps put the changing logistics landscape into perspective, providing a snapshot of the different puzzle pieces required to get goods through the supply chain as quickly and efficiently as possible. For his part, Chung says he expects the evolution to continue, noting that the changes occuring in logistics infrastructure are "not a one-off twist."
"It's the start of a transformation of logistics and supply chain," he says.
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The U.S. manufacturing sector has become an engine of new job creation over the past four years, thanks to a combination of federal incentives and mega-trends like nearshoring and the clean energy boom, according to the industrial real estate firm Savills.
While those manufacturing announcements have softened slightly from their 2022 high point, they remain historically elevated. And the sector’s growth outlook remains strong, regardless of the results of the November U.S. presidential election, the company said in its September “Savills Manufacturing Report.”
From 2021 to 2024, over 995,000 new U.S. manufacturing jobs were announced, with two thirds in advanced sectors like electric vehicles (EVs) and batteries, semiconductors, clean energy, and biomanufacturing. After peaking at 350,000 news jobs in 2022, the growth pace has slowed, with 2024 expected to see just over half that number.
But the ingredients are in place to sustain the hot temperature of American manufacturing expansion in 2025 and beyond, the company said. According to Savills, that’s because the U.S. manufacturing revival is fueled by $910 billion in federal incentives—including the Inflation Reduction Act, CHIPS and Science Act, and Infrastructure Investment and Jobs Act—much of which has not yet been spent. Domestic production is also expected to be boosted by new tariffs, including a planned rise in semiconductor tariffs to 50% in 2025 and an increase in tariffs on Chinese EVs from 25% to 100%.
Certain geographical regions will see greater manufacturing growth than others, since just eight states account for 47% of new manufacturing jobs and over 6.3 billion square feet of industrial space, with 197 million more square feet under development. They are: Arizona, Georgia, Michigan, Ohio, North Carolina, South Carolina, Texas, and Tennessee.
Across the border, Mexico’s manufacturing sector has also seen “revolutionary” growth driven by nearshoring strategies targeting U.S. markets and offering lower-cost labor, with a workforce that is now even cheaper than in China. Over the past four years, that country has launched 27 new plants, each creating over 500 jobs. Unlike the U.S. focus on tech manufacturing, Mexico focuses on traditional sectors such as automative parts, appliances, and consumer goods.
Looking at the future, the U.S. manufacturing sector’s growth outlook remains strong, regardless of the results of November’s presidential election, Savills said. That’s because both candidates favor protectionist trade policies, and since significant change to federal incentives would require a single party to control both the legislative and executive branches. Rather than relying on changes in political leadership, future growth of U.S. manufacturing now hinges on finding affordable, reliable power amid increasing competition between manufacturing sites and data centers, Savills said.
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.