October 8, 2019
Once thought of largely as opportunities for conversion to residential lofts and open offices, the close-in urban warehouse is having a resurgence in popularity, writes NKF’s Amy Binstein. “Accelerating growth of e-commerce and rising demand from consumers for next-day delivery has highlighted the need for companies to locate warehouses and distribution centers close to densely-populated city centers,” she writes.
Although retailers generally have located their distribution centers outside the limits of major population centers due to higher rents, taxes, labor costs and traffic congestion, they’re now focusing on locating those facilities as close as possible to the sources of demand.
Much of this demand, of course, comes from Millennials, “who disproportionately are choosing to live in large metro areas, and who value faster delivery of online purchases.”
“This incentive has led to locating last-mile distribution centers at urban warehouses, simultaneously shortening delivery times, alleviating rising supply chain costs and enhancing the value of close-in distribution space,” Binstein writes.
The trend has implications both for investors and for current owners. “Investors with capital to deploy may wish to consider properties that allow their tenants easy access to labor, as that tends to be a roadblock for distribution centers,” Binstein writes. “Current owners of older properties can take advantage of a competitive market and consider selling, or renovating in order to attract distribution tenants.”
Pictured: Madison Realty Capital’s warehouse facility in Jamaica, Queens.
For comments, questions or concerns, please contact Paul Bubny