LOGISTICS
Key Takeaways
Logistics
Logistics real estate refers to commercial buildings such as warehouses and distribution centers that aid the movement of goods from factories to consumers. Primary occupiers include online retailers, big box retailers like Walmart, and shipping services such as FedEx and UPS.
Properties
Newly constructed logistics properties seek to drive value through a combination of site and building efficiency, state-of-the-art robotics and automation technology, and prime locations facilitating direct to consumer or regional and national transportation.
Asset Value
As online spending increases, the demand for facilities to house and store inventory is greater than ever. Distribution warehouses, fulfilment centers, and specialty logistics buildings are crucial for businesses to meet the expectations of consumers.
What is logistics real estate?
Logistics includes warehouses and distribution centers that facilitate the worldwide movement of goods from factories to the end consumers.
Who uses logistics real estate?
The primary occupiers of logistics real estate include firms that manage distribution networks. Some of these companies focus exclusively on transporting their own products while others provide shipping services to outside individuals and businesses.
Online Retailers
Sell products primarily through digital outlets. As shopping habits evolve, the industry continues to rapidly expand. Amazon ranks as the largest online retailer in the US and rents hundreds of logistics facilities nationwide.i
Big Box Retailers
Rely on expansive networks of warehouses to supply stores. Many of these companies have developed online platforms to complement their physical footprints. Prominent examples include Walmart and Target.
Third-party Logistics
Firms, such as FedEx and UPS, that specialize in providing outsourced logistics services, including transportation, inventory management, and order fulfillment.
More than 58 million parcels pass through
logistics buildings each day in the US ii
What are the secular drivers for the sector?
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Online spending, which requires three times as much warehouse space as tradition retail sales,iii continues to accelerate, and total annual sales have jumped nearly 60% over the past five years to $1.1 trillion.iv As shoppers increasingly gravitate toward digital outlets, online sales are expected to continue climbing.v
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Many firms are expanding inventories to build out resilience to future supply shocks, deepening the need for storage space. Retail inventories increased more than 20% from 2019 to 2023.vii
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International trade brings in more than $750 billion worth of raw materials and finished goods into the US each year.ix Cities with major seaports are out growing current logistics properties and are looking to expand their logistics footprint.
Online Retail Spending Projected to Continue Accelerating vi
Retail Inventories Have Rebounded from a Pandemic Dip and Are Still Climbing viii
What are the common building types?
Logistics properties are typically designed for a specific purpose and operating type, where loading/unloading, storage, and vehicle access determine optimal building use. Most logistics properties are single-story buildings with low maintenance costs and basic finishes.
Bulk Distribution Warehouses
Serve as distribution hubs that service large geographic regions. Distribution centers can cover the equivalent of several football fields and are strategically located along highways on the outskirts of major cities.
Flex/R&D Buildings
Multiuse spaces that include warehousing and manufacturing, and they are typically located in business parks.
Last-Mile Fulfillment Centers
Represent the last step of the supply chain before products reach the consumer. These facilities are often found near highly populated areas to meet shopper expectations for next-day and same-day shipping.
Specialty Logistics Buildings
Cater to specific user needs. Specialty logistics include truck terminals for loading and unloading, and cold storage sites for perishable items.
How is value created at the asset level?
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Create Efficiencies: Additional doors and loading docks can translate into faster product throughput, while expanded parking can support more workers and bigger semi-trucks.
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Technology: Many logistics tenants prioritize buildings that support state-of-the-art robotics and automation technology to streamline operations.
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Go vertical: Taller ceilings can meaningfully increase total storage area and are most economical when buildable land is scarce and expensive.
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