E-commerce Shaping Industrial Distribution Center Growth

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JLL Indy Industrial Distribution Centers

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The Rise of Industrial Distribution Centers

E-commerce has been the fastest-growing segment of the retail market for the last four years and is expected to be a large share of the market for the next 15 to 20 years. Customers now expect endless choice and instant gratification, so e-commerce fulfillment centers are stepping up to the plate to meet this demand. According to a JLL report, in 2013, 12% of U.S. industrial construction, on a square-footage basis, was e-commerce-related.

According to a 2016 JLL report, thanks to 3PL (third party logistics) firms, goods are able to reach more people, quicker than ever. This is due in large part to the increase of retailers and consumer goods-related firms’ connectivity to consumers via online shopping. To meet this demand, there is an increasing need for smaller distribution centers close to major population.

For online retailers, ”getting local” with inventory is also critical to success. Getting local means that retailers need to have a real estate strategy that balances the cost of new space, more inventory, advanced order management technology, faster shipping response times and lower shipping costs.

Increased domestic consumption and e-commerce sales continue to drive demand in the industrial sector throughout the United States. JLL’s Winter 2016 Demand Study saw the Midwest leading the country by volume, with an average requirement size of 353,680 square feet. Additionally, demand in the Midwest has increased by 26.5% in a span of 12 months.

Directly reflecting these trends, Indianapolis has seen medium-sized fulfillment facilities spring up outside of the city. Currently, there is approximately 2.2 million square feet of industrial product under construction in Indy, which includes 1.4 million square feet of speculative development and 800,000 square feet of build-to-suit construction. Best Choice Products, a seller of direct-from-manufacturer products for children, pets and households, recently chose Indianapolis as a strategic location for one of its distribution centers. Located close to the airport and several major highways, these Indianapolis facilities boast the ability to get goods to people faster.

By carefully selecting sites for facilities and using the ground networks of major package delivery firms, retailers will continue to capitalize on increased demand created by e-commerce sales.

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