Industrial brokers in several tertiary markets across the country have been experiencing an exponential growth in the demand for industrial space in the 5,000- to 30,000-square-foot range.
There is a need for speed and agility for last-mile delivery service providers to support the unprecedented growth of consumer increase for e-commerce order volume. According to Kraig Foreman of the DHL Supply Chain, “The only way next-day delivery can become cost effective, and same-day delivery is feasible is that the product being ordered is already close to the customer at the end of the order.”
This demand has given rise to the local niche service providers who can be quick and nimble enough to satisfy the changing demands of the consumers. E-commerce customers now have access to more package tracking information and they have the capability to interact with the delivery drivers.
Major fulfillment entities, including Amazon have had to launch innovative last-mile services to connect with customers and reduce delivery delays. This will be the predominant trend through the remainder of 2020, especially as the state of regional logistics evolves in the wake of the coronavirus pandemic.
The Lehigh Valley market is within a 90-minute drive of the ports of Newark/Elizabeth and Philadelphia, where a large portion of consumer goods are shipped by manufacturers. Our highway network offers access to the major middle Atlantic and northeast cities that are within a day’s drive.
Our regional population of just under 700,000. The Lehigh Valley is considered to be amongst the strongest tertiary markets in the country. These factors affect the consumer product supply chain trends within the last mile delivery service niche.
There has been a significant increase in the demand for short-term leases for industrial space that offers the flexibility and conforms to the ebb and flow of product distribution patterns.
Consumer goods are often heavy, bulky, and more costly to ship. The delivery of these goods during the final mile from warehouse to consumer is labor intensive. Local ordinances often prohibit the use of standard-sized delivery trucks along residential streets. Therefore, smaller box trucks, vans, and cars are often used to take deliveries to consumers.
Now more than ever the last mile delivery demand has increased due to the growing percentage of consumer purchases being done on-line. Improvements in the tracking software technology have occurred out of necessity and will continue to evolve moving forward.
Most regional distribution centers use tracking bar codes on their packages to enable the delivery person to scan packages. This cuts down on the need to handle the package and makes the tracking process more efficient.
The number of niche product distributors has grown significantly for smaller service providers like Trillion Source Inc., a company that moved into the Lehigh Valley from the New York Metro area seven years ago. The company is a distributor of school supplies, lifestyle products, and health/beauty aids from manufacturers that do $3 million to $40 million in sales.
Some of these manufacturers rely on small niche service providers like Trillion to give them flexible terms and services that a larger fulfillment corporation such as Amazon may not. Niche service providers like Trillion also offer pick and pack services on a contractual basis. These contracts are usually short-term and require a frequent adjustment to the space occupancy term and rental unit size that they can commit to with landlords.
As retail space is vacated, or manufacturers experience the need to reduce their footprint to gain optimal efficiency, this creates pockets of opportunity for landlords to fill their buildings with these niche service providers in the last-mile delivery sector of the economy. Some of the logistics service providers are willing to compromise on the ceiling heights, loading facilities and locations, just to be able to have more flexible lease terms and quick occupancy and exit. Older, less functional space may be adequate for these short-term tenants.
The income from short-term leases provides some landlords with the funds to renovate to their buildings to make them more functionally relevant to meet current market demand. Additional loading dock doors, higher sprinkler pressure capacity, and LED lighting fixtures are some examples of what landlords can do to improve the marketability of their light industrial space. The infill of urban industrial space that is close to densely populated areas will increase as last-mile service providers strive to shorten the delivery time to satisfy the increased percentage of e-commerce consumer buying habits.
Amy Hawley is with SIOR/ SVN-Imperial Realty. Mark Fiorini is president of Westgate Global Logistics. Fred Koeck is with Derby Industries LLC and is president of the Council of Supply Chain Management Professionals. Afolabi Oyerokun is the owner of Trillion Source Inc.