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Will Coronavirus Lead to Increased Demand for Smaller Warehouses?


Les Shaver has an interesting piece on, The Coronavirus Will Accelerate the Shift to Smaller Warehouses. Lee has some excellent insights from Adam Roth of NAI Hiffman, on why Adam sees a potential move from the 1M SF warehouses to smaller warehouses.

Adam Roth, an executive vice president with Oakbrook, Ill.-based NAI Hiffman, thinks that soon may be changing.
“What I’ve found is by far the driver of real estate and site selection is transportation,” says Roth, who has a background in logistics and real estate. Roth believes transportation is 12 to 15 times the cost of real estate.

Roth goes into why the cost of transportation could be a large driver of the move to smaller warehouses.

New transportation rules for shippers were introduced at the end of 2019 and the beginning of 2020. Those included stricter electronic logging and drug and alcohol laws for truck drivers and new clean fuel mandates for ocean vessels.

With these changes, it is possible to see how growing logistic and e-commerce companies could benefit from having multiple locations to serve the country instead of a few very large facilities. Adam goes on to explain:

He completed a study that says companies could serve 90% of the US population with next-day service through 10 well-located facilities with a maximum 300-mile distance. Already, major firms like Amazon and Walmart are buying smaller sites, according to Roth.

“It [300 miles] is kind of far, but you could, you could argue it almost provides a next day service,” Roth says. “Then take it a step further, and you can hit within 150 miles of 90% of the U.S. population with 33 locations.”

These types of economic drivers could be a change into how warehouses are viewed by growing businesses looking to serve the country as efficiently as possible.


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