Logistics Real Estate Needs Shifting to Meet Modern Consumer Demands

Logistics real estate has suddenly become extremely important as lightning-fast delivery becomes the norm in e-commerce rather than the exception. Having enough high-quality space in top locations near city centers can make or break a business these days.

Supply chains might still have to serve physical stores, but the urbanization trend is driving demand for distribution centers that are strategically located near cities. As supply chains become more complex and efficient and less expensive at the same time, it’s only natural for some big changes to take place.

Rent is one of the areas that will see an unusually rapid cost increase. Warehouses in remote locations are no longer going to be enough; it’s the time and distance between the warehouse and high concentrations of customers that will drive warehouse location decisions as next-day delivery gives way to same-day and even one-hour delivery. Logistics facilities will need to step up their game in order to make the most of the space that tends to be available in such locales, and some will even need to adapt to multi-story structures.

Inventory carry costs, which presently take up around a quarter of total supply chain costs, will also likely climb as consumption grows and companies need to store a wider variety of goods in higher volumes to meet customer demands when it comes to availability and delivery speed.

Transportation and Labor Costs Expected to Drop

The good news is that some areas of logistics real estate are set to see savings in the years to come. Energy and transportation are poised to be areas where significant savings will be noted, which is good news considering this area tends to be the biggest expense for supply chains. New advances in electrification, energy storage, solar power and autonomous driving are bringing costs down, and smarter use of infrastructure is also helping.

Labor costs, meanwhile, account for under one third of all supply chain costs, and they’re set to drop even further thanks to the use of autonomous vehicles, which will help deal with truck driver shortages.

This blog post was based off of an article from Fortune. View the original here.

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