3 Ways Last-Mile Delivery is Impacting Local CRE Markets
NAI Global recently posted this article about last-mile delivery and how it impacts commercial real estate.
Last-mile delivery is the process of getting a product to its final destination. With e-commerce growing in popularity, more companies are focusing on same and next-day delivery. This means that the focus on last-mile distribution has become more important than ever as customers begin to expect more out of their online shopping experiences.
If you thought that last-mile distribution only affected online retailers, you’re wrong. It has an impact on commercial real estate as well, and here’s how:
1. Increased demand for warehouse space
This demand for warehouse space has driven up the lease rates around the country, especially in the Bay Area market where prices have risen nearly 10% in the past two years. That’s because online shopping centers generally have a lot of pressure to deliver their materials promptly. This, in turn, has created a need for last-mile delivery centers which can ensure proper delivery speeds. In terms of the CRE market, this means a bigger demand for distribution warehouses that stock and ship goods, and metropolitan areas like the Bay Area, where space is limited, this creates a larger demand for industrial properties.
2. Certain cities will experience growth
The warehouse industry is projected to grow in major metropolitan areas across the United States, but Chicago, Los Angeles, and New Jersey are expected to get the majority of the growth. These three areas plan to expand their last-mile warehousing networks to include state-of-the-art smart technology, which means that investors and developers could anticipate a greater need for industrial working spaces nearby.
3. A shift towards urban centers
Historically, e-commerce distribution centers were located on the outskirts of towns or in rural areas where the property costs were significantly lower. However, these days, investors located major metropolitan areas can expect for last-mile fulfillment centers to emerge. While this is mostly due to the need to quickly deliver goods to America’s most populated areas, there’s also a correlation between millennial migration patterns and growing last-mile delivery markets. Interestingly enough, markets in Austin, Portland, Seattle, and Salt Lake City are expected to see increased demand in warehouse space over the next few years.
It’s about Growth and Population
The importance of last-mile delivery centers is just another way that society is evolving over time. Now that internet shopping has become as efficient as it is convenient, brick-and-mortar stores across the United States are beginning to lose their appeal, especially with millennial consumers. This, in turn, has created a bigger demand for warehousing and logistic companies, as most customers want their goods delivered in a timely manner.
It doesn’t appear as if last-mile delivery centers will lose their popularity over time. In fact, they seem to be growing at a healthy rate every year. While it’s impossible to predict with 100% accuracy which regional markets will benefit the most from investing in last-mile delivery centers, it’s safe to assume that these distribution centers are becoming more popular in cities with growing millennial populations. After all, the need for these delivery centers is to better service the local population.