Legend has it that e-commerce began in April 1995 when Jeff Bezos went into his Seattle garage and boxed up the first book he sold on amazon.com. Since then, internet access has grown from 0.4% to almost 50% of the world's population. E-commerce has grown to match, far outpacing the growth of traditional retail. This boom benefited industrial real estate across the country, as monstrous distribution centers were built near major population centers.
But in 2017, e-commerce's best customers – millennials – often don't live near those distribution centers. Cities with a high percentage of millennials like Portland, Seattle, Minneapolis, Denver and New Orleans still have significant need for e-commerce distribution facilities. And with today's focus on next day or even same day delivery, it is the last mile of the delivery from seller to consumer that matters the most. Whoever can cover that last mile the quickest and the cheapest will have the advantage.
One solution? The urban warehouse. While traditional warehouses are typically located on the urban fringe and focus on storage capacity, urban warehouses are sited with a primary focus on reducing delivery time. For e-commerce, the best sites are often in the urban core, but those sites often present challenges. Most urban core development these days is infill, making assembly of a large site difficult. Buildings available to repurpose often don't offer physical features needed for today's automated warehousing equipment. Urban warehouses also compete for sites with other, higher value uses like mixed use offices and residential lofts. And nearby urban denizens often don't like the increased truck traffic.
Despite these challenges, e-commerce will continue to grow, and e-retailers will see increasing competitive advantage to covering the last mile as quickly and cheaply as possible. For commercial real estate professionals, this means the urban warehouse will be a use on the rise for many years to come.
**UPDATE - 9/18/17**
And just like that, Amazon announced plans to open a 1-million square foot urban warehouse fulfillment center on NE Lombard in Portland. You can read the full story here at oregonlive.com.