Flying cars, self-driving trucks, super-fast bullet trains underground, flying machines that deliver packages, computers that can make millions of calculations a second, robots that can learn and manage a myriad of tasks – all of the things that seemed like science fiction only a short time ago already exist or are well within our grasp.
Which leads to the question: What will warehouses and distribution centers look like a dozen years from now, and into a largely uncertain future?
Some experts think they have the answer, and their views are gathered in a recently-released report titled “Roadmap for Change: The Flexible Distribution Facilities of the Future” published by the Society of Industrial and Office Realtors and the Industrial Asset Management Council.
“While businesses of all sizes and industries are scrambling to keep up, distribution is being upended entirely,” the report adds. “Some experts have suggested that in 30 years, the distribution industry as we know it today will disappear altogether. But that doesn’t mean that demand for warehouse space is going to go away.”
Researchers see retailers shifting from the concept of maintaining inventory stock to inventory flow. They are reducing the amount of goods stored and the amount of time they remain in storage while beefing up their logistics networks to move goods from point A to point B.
The paradigm shift also extends to production. Sophisticated 3-D printing and other additive manufacturing techniques are enabling fast and cost-effective product customization.
In some cases, this leads to the elimination of bulk production entirely to yield “orders of one,” the researchers observe.
The report is a product of an initiative mounted by SIOR/IAMC that they call DesignFlex2030. It explores the potential of new industrial building design approaches that could lead to more flexible, adaptable and sustainable facilities in the future.
According to Jim Hirt, chief executive officer of SIOR, “This paper digs deep into the issues currently facing distribution and manufacturing center – a major component of the industrial real estate – as well as the trends and challenges that will impact this sector in the future.”
Tate Godfrey, Executive Director of IAMC, makes the point that, “Maintaining a next-generation transportation infrastructure continues to be a top concern for companies, economic developers and real estate developers so we’re hoping this paper can shed some light on next steps in order to achieve that goal.”
While there is no single solution to the varied and complex distribution dilemmas faced by every industry, the sponsors say the paper instead offers innovative ideas and concepts that can serve as a jumping off point across the range of industries.
The Hybrid Facility
This report discusses a hyperlocal urban resource center and mixed-use development with the warehouse component situated underneath the residential and office space levels.
This hybrid facility could accommodate a rich mix of uses, including an ecommerce distribution center, customer pick-up and service center.
“This is a perfect solution to the dilemma faced by many companies that want to locate warehouses closer to their customers: The closer into urban areas you get, the more expensive the land becomes,” explains Karl Heitman, DesignFlex2030 team co-lead and president of Heitman Architects.
In this case, the residential component covers the cost of development. “It creates a new financial rationale that alters the old commercial real estate conventional wisdom about not using higher value land for lower value purposes,” Heitman says.
This future already has begun, the researchers point out. Industrial real estate firms like Prologis currently are looking for land in densely populated areas to build this new kind of warehouse.
In the Here and Now
“But with demand growing and limited availability of large, industrial-zoned parcels in desirable locations, designers of warehouse space are beginning to look upward, rather than outward,” the
report says. “They are changing their approach so they can take advantage of airspace to build vertical fulfillment centers that fit into the cityscape.”
Although a handful of high-rise warehouses have existed in the United States for decades, as urban land become more expensive, the trend moved to outlying small towns and industrial areas outside of major cities.
In April 2017, Prologis began building of the first kind of these facilities for inclusion in its own portfolio – a three-story, 589,615-square-foot fulfillment center in South Seattle.
It is the first of its kind in the U.S., according to the researchers, in being a highly-visible, Class A facility featuring ramps for truck access to second-floor loading docks. A freight elevator will link the third floor to ground floor loading docks.
Prologis says the new paradigm is needed because of two factors that are at war with each other: consumers’ increasing expectations of rapid and inexpensive delivery of online orders, and the continuing rise of transportation costs. In response, retailers and manufacturers are looking to move fulfilment operations closer to population centers.
With inner city vacancy rates at historic lows, however, finding available square footage is a challenge – which also is driving the transformation of Prologis’ site selection and design approach.
Other predictions made by the SIOR/IAMC prognosticators include:
- Global manufacturing centers with multi-modal freight shipping and receiving options.
- Regional intermodal facilities with high-efficiency container movement, all-electric vehicles and intelligent automation.
- Multifunctional sites featuring showroom, repair center, assembly, and 3-D printing capabilities for additive manufacturing.
- New network connections to a web of multiple fixed and mobile facilities that will vary in size, shape, function and scope, strategically located at various points along the logistics journey between manufacturers and end users.
- Emphasis is optimizing routes and modes to get products from manufacturer to the end user quicker, faster and cheaper than anyone else.