New Prologis study examines “last touch” impact on industrial real estate

New research conducted by San Francisco-based Prologis, Inc. indicates that for logistics real estate, the only constant is change.

The initial installment of a three-part series released today examines the latest consumer trends driving new site selection and construction. Specifically, in studying “waves of change” in supply chains, analysts identify four trends that are having a positive impact on logistics real estate – each of which can help clarify strategies to future-proof real estate operations and investments.

Key points made in the research include:

*Shippers are increasingly evaluating end-to-end total network costs rather than individual procurement operations for transportation, real estate and labor—a best practice that forward-thinking customers are adopting

*Optimizing a supply chain often means securing infill logistics real estate for better service and lower total supply chain costs

*The rise of e-commerce is pulling supply chains closer to consumers

*Logistics real estate near consumers has higher barriers to supply and deeper and more diversified demand.

Chris Caton, Prologis’ Head of Research, told Logistic Management in an interview was that while supply chain managers have been scrutinizing total landed costs for quite some time, the pressures placed by e-commerce have made the process more complex.

“Pricing is far greater than anything we have seen before in this cycle,” he said. “Rents are up by 90 percent in some major population centers, and we are seeing more demand for urban properties than ever before.”

Prologis notes that these “last touch” facilities in urban locations support city distribution.

“E-commerce has energized demand for this class of facilities, enabling rapid e-fulfillment and time- sensitive distribution,” say analysts. “Last Touch facilities are an extension of established supply chains, not only taking goods to retail centers and storefronts, but also offering higher service levels by facilitating delivery all the way to where consumers live and work.

 In addition, say analysts, these locations are ideal for local and small businesses, offering proximity to other customers/suppliers 
and an ample workforce.

Furthermore, add analysts, the term “Last Mile” is often used but is a bit of a misnomer. That’s because with this title actually often cover much greater distances.

According to Prologis, Last Touch facilities offer two new benefits: advancement of service capabilities (urban sites like these are required for same-day and shorter delivery windows) and management of transportation costs (by allowing the final transportation leg to be split into two)

“As a consequence, we are seeing much more demand growth on the production side,” said Caton. “And the horizon is not nearly so hazy as it has been in the past. Consumer information will be increasingly vital for future proofing and risk management.”