“When you sign that lease you’re making a bet on a location,” Mullen said.
As consumers demand faster, cheaper and even free shipping, businesses need to be more flexible with their fulfillment, which presents a timing mismatch when it comes to industrial leases.
“Ten years ago, companies used to revisit their strategy every three to five years. Now it’s happening sometimes multiple times a year,” said Mullen.
Shippers today still have to ask themselves three central questions: How many facilities, where should they be located, and what do the facilities need to be able to do? But with the pace of change in the e-commerce sector, making a long-term commitment is daunting.
“If you’re looking at [your supply chain] every year, but you’re making 10- to 15-year lease promises with a massive building and all kinds of automation invested — those two timeframes don’t add up.” Mullen said this is why 3PLs have suddenly become such prominent players in large warehouse leases.
Outsourcing fulfillment and logistics allows businesses to adapt more quickly to changing requirements. “It allows you to be more nimble with your supply chain and let somebody else take care of it while you focus on your core competency,” said Mullen.
Consumer desire for faster delivery is also driving shippers to choose warehouse real estate closer to population centers. Inland Empire, California, Atlanta and Chicago had the largest amount of square footage represented in the top 100 deals.