Colliers Q&A: Corporate Occupiers Respond to Industrial Sector Challenges

Connect Media asked Colliers International’s Pete Quinn, National Director of Colliers Industrial Services-USA, to share the top logistics and site selection strategies for industrial user-groups and participants in the logistics, transportation and distribution industries. Here’s his insights about the goals of corporate occupiers, changes he’s seeing in the industrial space, as well as impact e-commerce is having in our latest 3 CRE Q&A.

Q: What are the broad goals of corporate occupiers in the industrial space, and how are they specifically responding to challenges faced today?

A: Many corporate occupiers of industrial space have no connection to e-commerce. But in today’s environment, all businesses are impacted by the drive for direct-to-consumer marketing. Most of our clients are interested in how to get their products to the consumer as quickly and efficiently as possible, all while controlling supply-chain costs.

There are a number of factors these businesses have to consider, from labor shortages to record-low vacancy rates in the industrial sector. The economy is booming, but with construction costs, rental rates and wages on the rise, it can be a challenge to keep those supply-chain costs down.

Our clients are responding to these challenges by looking at larger distribution centers in locations near large population centers or inland hubs. This helps businesses get their products out quicker, while lowering transportation costs. In addition, distributors of products continue to invest in sophisticated material handling equipment and warehouse management systems to reduce labor.

Q: What are some of the more intriguing logistics and site selection strategies you are seeing emerge in 2018, and how are they shifting?

A: In the past, our clients placed the greatest emphasis on transportation costs with lesser emphasis on wages, taxes, union activity and labor availability. Now, we are seeing availability of labor as a driver. While it may not top logistics issues as a determinant in selecting new locations, it is far more important than it used to be and is given only slightly less weight than transportation costs and service levels. This, again, has driven businesses to look at locations closer to urban centers where there is greater access to labor.

Q: Clearly, e-commerce is here to stay and is becoming a dominant force in our economy. What do you see ahead as the logistics and industrial sectors adapt to the increasingly digital commerce world? What should occupiers and landlords do to prepare?

A: E-commerce distribution is much more labor intensive than traditional warehousing, and this is creating a shortage of available personnel. Site selection focused on available labor and increased amenities to retain employees will be the most important function in distribution. Some amenities we are already seeing to retain employees include air-conditioned warehouses, higher-end break rooms and employee spaces that are now rivaling office locations. In addition, more on-site training and/or education reimbursement for employees to be trained in new technology being implemented in distribution is a significant way to differentiate and attract talent.

At 126 million square feet across 315 unique locations currently (and adding 26 million more square feet in the next 18 months in the U.S.), Amazon has a major role to play in shaping the Industrial footprint from an ecommerce and rapid fulfillment standpoint. Looking at the evolution of Amazon’s network shows us the diversification that is occurring regarding types of Industrial sites and the roles that each site type is playing in the overall distribution ecosystem.