With the rapid growth of e-commerce, there is a huge push on speed of delivery, more specifically, the speed of goods to clients, according to Daniel E. Fogarty Jr., vice president of Conor Commercial Real Estate.
“People are now at the point where they are ordering more and more of their goods online,” said Fogarty. “Next day delivery had become the norm, and now same day delivery is the push by all of the major online retailers like Amazon, Walmart, and Home Depot.”
Due to this, Fogarty said, all of the big retailers are re-configuring their supply chains so that they have enough capacity close to all the major population centers in the country.
“So we’re seeing more big box facilities being built for the Amazon’s, FedEx’s and UPS’s that support these facilities, and do a lot of their same day packages for them. There has just been a rapid and massive growth of these types of facilities.”
The rapid growth of these facilities did not happen overnight. According to Fogarty, “It’s something that the people at Amazon and Walmart, and all of the big retailers, had a vision for years ago. It’s just that now we’re seeing it come to fruition. It takes time to implement these things.”
“With Amazon and the 1.7 million they are currently getting ready to occupy in Kenosha,” he continued, “That’s just a drop in the bucket. They have five million square feet in Indianapolis—and that’s just there. They are going into millions of square feet around the country right now, with millions more planned, and they can only implement so fast.”
Fogarty also noted IKEA taking about 850, 000 square feet in Minooka, and said that he is sure it will not just serve as a distribution center to their retail stores.
“Everybody does a huge amount of online business,” he said. “It used to be that a distribution facility was set up to serve retail outlets. Now, even in the grocery business, a warehouse is the spot that ships directly to our homes. So as far as that IKEA warehouse, I’m sure it is going to ship as much, or more, products directly to people’s homes, as it will to the IKEA stores throughout the region.”
“That changes the way the box is designed, and it really changes the way that they do business. What’s happening is these big box buildings have maybe one or four doors dedicated to UPS and FedEx ground trucks that come there everyday. Those employees do not even go to UPS or FedEx, they go straight to that IKEA, Amazon, or Home Depot building each and every day, and load up their trucks full of small deliveries to go wherever.”
“With Home Depot’s two million square feet down in Joliet’s intermodal,” Fogarty continued, “They probably have 10 UPS trucks. They probably have the region split up in 10 areas, and UPS is delivering products to people’s doors every day for them.”
So what does this mean for the United States Postal Service? Fogarty said he would guess that they are also going directly to the warehouses, competing, and trying to get a share of the market with UPS and FedEx.
“I think they’re evolving,” he said. “They seem to be, which is typical for publicly owned entities to be a bit behind the private enterprises. But, I think they’ve done bright stuff like, stamps.com, where everyone can print their own postage. You can get benefits and free stuff, like posters, for doing that. So they’re trying to circumvent having to go to the post office, and make themselves competitive with FedEx and UPS when it comes to shipping.”
While Walmart and Amazon are the major retailers mentioned frequently, Fogarty noted, that Apple is moving so much product, they are probably at the head of reconfiguring the supply chain.
“All of the industries that are growing rapidly—which is e-commerce in general—are technology, energy, and pharmaceutical companies. They are putting a lot of money into technology, research and development, and the way that they distribute their goods. Obviously, there is a long list of companies you buy goods from, like Best Buy, Menards, and Loews. They all have big supply chain foot prints like the other online retailers.”
Besides Amazon, according to Fogarty, the biggest gainers have been FedEx and UPS, because their service line has been same day delivery.
“Sometimes it’s within an hour,” Fogarty said. “They’re almost like a giant, macro, international messenger service. So they’re already built to provide this kind of service to retailers. I see them benefiting the most.”
There are a few others benefiting Fogarty noted, like Newegg, W.W. Grainger, and ULine.
“ULine is the regional surprise with how rapid they have grown. They have a million square foot distribution facility in Kenosha, where they are headquartered. They have a beautiful 250 to 300,000 square foot office facility that stands four stories high, and looks like something that should be sitting at the base of a mountain like a ski lodge.”
“They’re building another million immediately next door to their existing million, he said. “There’s also going to build a third million square foot facility just north by two interchanges, on 200 acres of land they’ve recently purchased—and they have more planned.”
Within the next four years, Fogarty noted, ULine will almost have four million square feet in Kenosha County.” “So I think they qualify as a rapidly growing surprise. Everybody knows who ULine is, but I don’t think anybody saw that kind of growth coming. That just shows you they are the, “we ship everything to every type of people”, company.”
