The disruption of online shopping has reverberated throughout the industrial and retail sectors—in opposite directions—during the past few years. This has led to a cycle-long crusade to refine how last mile distribution can be optimized. In the end, industrial assets may start to feel more and more like the retail properties they are displacing.
Quickly and efficiently getting product to the consumer is a question that has defined industrial real estate during the past decade or so. Even as the concept of a last mile facility grew into our collective conscious, it has evolved.
Ideally, last mile facilities are first defined by one trait that is the typical top feature for any real estate discussion: location. According to Zack Markwell, managing principal and CEO of Stonemont Financial Group, it is paramount to get as close as possible to population centers, clusters of rooftops where the consumers who are ordering the goods all reside.
Zoning can be an issue, as the best sites for a last mile facility were seldom intended to ever have any sort of industrial use. And of course, residents can be quite vocal in their opposition to any new activities near their homes that introduce industrial elements.
“When you hear of a truck terminal or a distribution center or a delivery station, all of those have more negative connotations,” said Markwell. “That’s because of how those facilities have historically been used, where they’ve been located and what they’ve looked like.”
It’s no accident that industrial properties have generally been clustered together, sequestered from other commercial and residential properties. They are tucked away because the perception—often well earned, in the past—was that they are dirty, loud, ugly and generate a lot of heavy truck traffic.
“This is a very different type of product that we’re bringing into these communities,” Markwell said. “We try to educate the community that it’s a different type of asset. This is really your new retailer.”
After location, the second feature that makes for a good last mile asset is a property with multiple points of access. The most preferable sites are those with two or three points of access on two separate roads. With different ingress and egress options, it’s easier to incorporate traffic coming to and going from the site with the normal traffic patterns of the surrounding community.
According to Markwell, meshing neighborhood traffic with activity at the last mile facility isn’t just hard coded by infrastructure, it can also be determined behaviorally. Scheduling large shipments as well as outgoing smaller shipments around residents’ daily lives can help alleviate congestion.
“What you’re really seeing is a new modern facility that operates much like a post office,” said Markwell. “The heavy haul comes in at night and then you’ve got the delivery vans that are out along with the rest of the traffic on the road during the day while folks are at work or in school.”
Stonemont is developing a last mile facility at South Branch Commerce Center, 3535 S. Ashland Avenue in Chicago’s Bridgeport neighborhood. A new, 260,000-square-foot spec warehouse/distribution building will go up on the 16-acre site that formerly housed the Wm. Wrigley Jr. Co. gum factory.
The project will offer a build-to-suit office area, 32-foot clear ceiling heights, 60 exterior docks (expandable by 20), four drive-in doors and a speed bay. The property will provide 113 trailer spots and 458 vehicle parking spots in a secured, auxiliary lot.
The site easily hits the first benchmark of location. It is surrounded by one of the city’s densest residential neighborhoods and is only three miles from downtown. The flexible site plan—with drive-through capabilities and multiple entry and exit points—also helps to efficiently bring product in and out of the facility without disrupting the neighborhood. South Branch Commerce Center will have truck-maneuvering capabilities that are usually only found in less dense locations.
Acquiring the property was a coup, as the supply of urban infill locations that can serve these distribution centers is so constrained. But what about in the suburbs? It may seem as if the e-commerce phenomenon decimating the big box retail landscape might be an opportunity for just these kinds of last mile assets, but the solution is, unfortunately, not that simple.
Scale is important, too. The property should be able to accommodate the significant parking needed for the delivery vehicles. A shuttered big box retail site offers that, as well as the multi-point access to lessen traffic congestion. The inherent problem is in why those retail assets are vacant in the first place. It isn’t just that brick-and-mortar foot traffic is down, it’s down disproportionately in some areas more than others.
“The issue is that a lot of the dark retail is dark because those communities have changed. The population centers and residential areas have moved away from that retail,” Markwell said. “The same area areas that retail is chasing now are the same areas that we’re looking at for last mile facilities.” As delivery times for online orders dwindle, consumers won’t be content going backwards. This is why last mile facilities will only grow in importance in the coming years, even if the way they look and operate may change.
