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As demand for fast delivery rises, warehouses increase to meet demand

The demand for fast delivery has been on the rise. To keep up, developers must get creative in developing warehouses close to cities.

March 14, 2019

In the age of online shopping and instant gratification, consumers have come to expect the fastest in shipping and delivery options. Forty-six percent of consumers who order products online expect to have the option for next day delivery and 20 percent expect same day delivery. These numbers have grown in recent years, and will continue to grow as instant delivery becomes the norm and less of an extravagance.

With the need for the fastest possible delivery continuing to rise, retailers are adjusting their warehouse and logistics strategies to meet customers’ expectations. The demand for industrial space is skyrocketing, especially in large consumer cities like New York. This demand for space is colliding with both the lack of available land and city restrictions aimed at easing traffic congestion. In response, developers are looking to build up instead of building out.                

The traditional warehouse layout in New York City was previously a large, one-story facility. This model had been favored by developers and occupiers because the structures are cheap to build. Additionally, land further out from the city and closer to the suburbs comes at a steep discount in comparison to Manhattan pricing. Yet, with the increase in demand for same or next day delivery, it is becoming critical that retailers move their warehouses closer to Manhattan and city municipalities nationwide, which requires some creativity.

In Asia, retailers have introduced vertical warehouses, which are designed so that smaller trucks can navigate via ramps to upper floors. This type of warehouse layout represents the future, especially in densely populated urban areas where land is both scarce and expensive, and where strong demand exists for last-mile fulfilment services for goods. This makes New York—where the market for available land is tight, rents are high and the industrial market is underserved due to space being obsolete—an ideal place to adopt the vertical warehouse trend. 

There are three industrial developments planned for the New York City area that will be multi-story facilities in Brooklyn, the Bronx, and Queens. These facilities will differ from the ones that have become so popular in Asia, in that they will be designed to accommodate larger trailers that are used in the United States. Since these facilities are more condensed in terms of land than the traditional industrial warehouse layout, they are being developed closer to the heart of the city, and therefore closer to a large conglomerate of consumers. Proximity plays a large role in high-traffic cities like New York, where the mayor has been testing anti-traffic congestion measures, including restrictions on delivery times. 

The multi-story warehouse revolution is not isolated to New York City, or even in the United States. From New York and Sydney this trend is indicative of the impact that same day delivery demand is having on industrial development. As consumer’s expectations continue to shift toward the same day model, multi-story warehouses will become the new normal, with New York leading the charge.

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