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April 1 2019

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Page 34 of 47 April 1 2019 | The Journal of Commerce 35 Cover Story Special Report JOC Guide to Warehousing and Industrial Real Estate EVEN AS SHIPPERS build smaller and more numerous e-commerce distri- bution centers closer to consumers, demand for warehouses with 1 mil- lion-plus square feet isn't letting up. Although the number of such sprawling distribution centers leased for logistics-related activities slipped from 2017 to 2018, logistics industry leases took up a similar percentage of the total square footage deliv- ered. With most of the mega-boxes last-mile deliveries as close to the end consumers as possible. However, those smaller warehouses are not always capable of serving large urban populations. While the trend to locate e-commerce fulfillment close to consumers continues, it does not mean that mega-boxes are out of favor, Campbell said. "The 1 million-square-foot building is still going strong. It makes economic sense," she said. The ability to locate mega-box distribution facilities close to the consuming population varies based upon the availability of land. Industrial real estate developers in the dense urban areas such as New York, Los Angeles, and Chicago must go farther out to find available land, whereas developers in cities such as Dallas, Indianapolis, and Atlanta that are not as land-constrained can find suitable properties in closer-in suburbs, she said. E-commerce and other logis- tics activities that directly serve consumers operate differently than traditional import distribution, in which product is usually stored for a period of time. E-commerce mer- chandise moves directly from the facility to the consumer. "It moves delivered over the past three years occupied, a new round of develop- ment has emerged, and it's likely to continue at least through 2020, said Gillam Campbell, research manager at Jones Lang LaSalle (JLL), an indus- trial real estate firm. Of the 17 facilities of 1 million square feet or larger that were leased in 2018, eight were taken for e-com- merce and logistics-related activi- ties, and that represented 47 percent of the total square footage that was absorbed, according to a report by JLL. In 2017, by comparison, 12 of 23 mega-box facilities, or 52 percent of total square footage, were devoted to logistics activities. In 2016, nine of the 16 mega-box warehouses delivered, or 56 percent of the total square footage, were for logistics-re- lated activities. Recent industrial real estate development has focused on urban infill locations in order to locate the Mega-box distribution facilities weather the e-commerce boom By Bill Mongelluzzo Multistory warehouses have been common in densely populated Asian cities for decades, and they are likely to find acceptance in the US. If you build them …

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