Any traveller in North America can easily see two seemingly divergent trends in North American warehousing.
In the mid-west of Canada or the US, ‘greenfield’ massive DCs (distribution centres) are being built, generally at points of confluence of rail and road assets. Conversely, there is a trend to repurpose existing structures in urban areas into warehousing. Two seemingly incongruent trends linked by what?
Again, the same traveller would observe that the US urban areas are peppered with empty or near-empty malls that only half a dozen years ago were chock full of retail stores and brimming with eager shoppers. What does this have to do with warehousing trends? Everything.
It is e-commerce or the ‘Amazon effect’ driving the seemingly incongruent warehousing trends, which are an integral part of an overall reshaping of logistics in North America.
The new ‘greenfield’ DCs are often part of a larger plan. In Calgary, a rail depot has been built in the middle of a prairie to serve a future campus of DCs. The basic logic of rail and road connections running in all directions is at the heart of the Calgary build and dozens of other similar projects dotting the North American landscape.
In many cases, the decision to build in these relatively remote locations is a result of them being halfway points between urban markets and entry points in the supply chain. The other advantage in constructing in these ‘greenfield’ locations is the opportunity to build from the bottom up – to create a state-of-the-art facility. The so-called ‘Fourth Industrial Revolution’ of automation may be well underway in many industry sectors, but warehousing is still lagging behind. Investors look at the combination of demand for warehousing space and the prospect to leverage automation as a great opportunity for institutional investment. So, there is money to back the wave of construction.
Up until very recently, DCs in the magnitude of 200,000 sqft (as opposed to the much larger 500,000 sq/ft plus principal DCs) have been the primary link for e-commerce. These same-styled warehouses handled the rise in television-generated online sales of the last decade. These television-generated sales (essentially moving catalogue sales into the living room) began altering how a DC functioned. Warehouses traditionally received the retail goods on pallets from points of entry or manufacturers and shifted them to the retail “brick and mortar” stores. With the advent of television-generated sales and now with e-commerce in full swing, retailers are increasingly sending their products directly to the consumers from the warehouses. How ‘bricks and mortar’ will co-exist with e-commerce is a work in progress, as all the empty malls in North America attest.
What is clear is there is a boom in urban warehousing that has not been witnessed in four decades. Besides re-purposing of existing buildings, warehouse builders are already building vertical warehousing in Seattle and San Francisco to meet the demand for last-mile logistics. A whole new world of urban logistics is being spun off from e-commerce that will re-shape not only North American warehousing but the entire supply chain.