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Offset vacant office space in warehouse demand – News

Ship Bob Fulfillment Center in Moreno Valley, California


rear ShipBob Last July, we decided to allow our staff to work from anywhere. Logistics startups have allowed landlords to build a wall in the middle of their Chicago headquarters to rent half of their space to another company.

On March 1, the office reopened with reduced capacity for socially distant meetings.

But while it uses less office space, Ship Bob’s real estate needs are growing at a tremendous pace. The company, which provides fulfillment services to online retailers, Number of warehouses From mid-2020, there are currently 24 locations (including 4 locations outside the United States), with 35 locations expected to reach by the end of 2021.

With a seven-year history, the company is the epitome of the US commercial real estate market.on the other hand Office vacancies surged As employers prepare for the postcovid future of decentralized work, the industrial market is hotter than ever due to the pandemic-fueled e-commerce surge and growing consumer demand for more products. I will. Amazon-Like speed.

Vacancy rates in industrial buildings are close to record lows, and new warehouses cannot be built fast enough to meet the needs of garment makers, furniture dealers and consumer electronics makers.Real estate company CBRE First quarter report In the industrial and logistics markets, nearly 100 million square feet of space was absorbed during this period, the third largest in history, with a record 376 million square feet under construction.

Rents rose 7.1% year-on-year to a record $ 8.44 per square foot, according to CBRE.The company wrote Follow-up report Last month, prices in coastal markets near densely populated areas and inland port hubs soared at double-digit rates. In northern New Jersey, average base rent for industrial real estate rose 33% year-on-year in May, the Riverside-San Bernier in California rose 24%, and Philadelphia rose 20%.

“The need to set up facilities in these markets, combined with record low vacancy rates, often leads to bid wars between occupants pushing up rents,” said CBRE.

Soaring prices

Before the Covid-19 hit the United States in early 2020, the wheels were in good shape. Amazon was already spinning. Next day delivery to default options For Prime members and Best buy And Walmart Was competing to add Fulfillment space Try to keep pace.

The pandemic has accelerated everything. Consumers were trapped in their homes and ordered more, but physical stores had to be digitized because they were floating.

Grocery delivery has been added to the tight market. Instacart And Postmate The number of orders from customers who do not want to enter the store has increased rapidly Costco, Albertsons Or Kroger shop. Instacart is currently planning a network of fulfillment centers with serial picking robots. Bloomberg,and the goal We are strengthening the fulfillment of the day through so-called Sorting center..

In addition to the rapid changes in consumer behavior, the pandemic also exposed vulnerabilities in the global supply chain.When Facilities in China And closed elsewhere, the store experienced a dramatic shortage clothes, Auto parts and packaging materials.

Retailers said they responded by securing more storage space to mitigate the effects of future shocks. James Corman, CEO of ElmTree Funds, a private equity fund company focused on commercial real estate.

“Manufacturing reshoreing is gaining momentum,” Corman said. Companies “need to bring more products ashore and reserve space for them so they don’t fall into another situation as they are today.”

He said all of these factors contributed to the rise in prices. In addition, inflation and supply constraints have increased construction costs, and companies are building more sophisticated facilities filled with robots.

“We have these automated forklifts, conveyor belts, and automated warehouse recovery systems,” says Koman. “This is all about the world going.”

Amazon will introduce new robots named Bert and Ernie to operate the fulfillment center.

Source: Amazon Inc.

Betting on the long-term need for fulfillment and logistics facilities, Elmtree has acquired about $ 2 billion worth of industrial space in the last seven months, more than a few years ago, according to Corman. .. He estimates that the United States will need an additional 135 to 150 million square feet to support the growth of e-commerce.

For ShipBob, the e-commerce boom has had a direct impact on its business model. But the competition for space also forces companies to consider high costs.

Ship Bob works with brands like perfume companies Documents, Powder energy drink maker Jaspy Tom Brady’s sports and fitness brand TB12We provide an extensive network of fulfillment centers for fast and reliable shipping and software for managing shipping and inventory.

Unlike retail giants, ShipBob doesn’t chase after large football-sized fulfillment centers and only leases at a few facilities. Rather, look for a normally family-owned warehouse that is 75,000 to 100,000 square feet and has unused capacity. Then equip with ShipBob technology and pay based on order quantity and space usage.

ShipBob hasn’t signed the lease, but is competing for warehouse space currently located on assets that are far more valuable than they were a year ago. ShipBob CEO Dhruv Saxena His company said it needs to be at major transportation and logistics hubs such as Southern California and Louisville, Kentucky, despite the sharp rise in prices.

“Even if profit margins are low, we need to find a way to place inventory closer to our end customers,” Saxena said in an interview at the end of last month. Raise $ 200 million With a valuation of over $ 1 billion.

ShipBob competes directly with many fulfillment outsourcing startups such as ShipMonk, Deliverr and Shippo. These four companies have raised a total of about $ 900 million over the past year.

Not just Amazon

Saxena said the main reason small retailers use Ship Bob is to avoid the cost and hassle of finding fulfillment space and hiring the workers they need. He likened his computing and data storage needs to a company that outsourced to Amazon Web Services and paid for the capacity it used rather than leasing its own data center.

“The same math applies,” Saxena said. “You can open a warehouse, hire people, equip them with software, or convert their fixed costs into variable costs and pay them on a transactional basis.”

Ship Bob employee and CEO Dhruv Saxena in the middle


Nate Faust is in the very early stages of construction olive, An e-commerce startup, working with brands to offer more sustainable packaging and shipping options through the use of recycled boxing materials and bundled items.

Olive opened its first two 30,000-square-foot warehouses in New Jersey and Southern California last year. Faust, who previously co-founded and worked at Wal-Mart after the acquisition, said that if they entered these leases today, they would easily be 10% to 15% higher.

Olive isn’t actively participating in more fulfillment center markets and isn’t facing lease renewals until February, but Faust said startups must be opportunistic. He said he is working with real estate company JLL and is constantly wandering in search of attractive spaces.

“Currently, the industrial space is so small that we are always looking for them,” Faust said. “If you find something that’s exactly what we’re looking for, it’s not unreasonable to have a duplicate lease.”

Vik Chawla, a partner at FifthWall, a venture company investing in real estate technology, said real estate market challenges are driving more emerging brands and sellers outsourcing models.

“As a single e-commerce business, it’s very difficult to secure attractive space to run your business,” Chaura said. “There is a line of people trying to enter the industrial building outdoors.”

Many of the tenants in that line are traditional major third-party logistics providers (3PL), including: CH Robinson And XPO Logistics as well as ups And FedEx.. At the top of the market, Amazon, Walmart, and Target are accelerating delivery, and in the case of Amazon, they are removing space to manage the huge market fulfillment of third-party sellers.

Prologis, The largest US owner of industrial real estate, May report Utilization, which indicates the amount of space used, has reached nearly 85%. The company said the vacancy rate was 4.7%, close to a record low.

According to Prologis updates, Amazon is the real estate company’s largest customer, accounting for 22 million square feet, followed by Home Depot at 9 million, followed by FedEx and UPS. Annual report.. Wal-Mart is seventh.

In April, a telephone analyst on Prologis revenue asked which type of client was most aggressive in pursuing leasing.

“E-commerce is a big part of that, but it’s certainly not all of Amazon.” Michael Carless, Prologis Chief Customer Officer said in response. “Sure, they are the most active customers, but there’s a lot of activity from Target, Wal-Mart, The Home Depot, and a lot of evidence that Chinese players are heading to the US and Europe.”

to see: EY on how Covid helped digitalize the retail industry



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