Home delivery revolution triggers violent expansion and repurposing in logistics property

repurposing logistics property

The past week has seen a string of announcements of warehousing developments that illustrate the direction and speed of change in logistics markets across the world.

Ocado, the e-retail grocer, has announced it is taking over a site in South London formerly occupied by a ‘big-box’ DIY retailer. The location is 6,475 sq m and part of a retail park owned by Aviva Investors. Ocado intends to use the site to build what it calls a “spoke hub” for its last-mile operations in South London. The whole site appears to be shifting from being a conventional retail site to a logistics park.

The large US retailer Kroger is opening a fulfilment centre outside Washington, D.C. Press reports describe the company as designating a 350,000 sq ft site in Frederick, Maryland, north of Washington, for the facility. It appears that the site will be a location for one of the two-dozen automated warehouses that Kroger is building in collaboration with Ocado.

Meanwhile, Amazon continues to open more fulfilment centres both large and small. The latest development just announced is an 855,000 sq ft facility in Tennessee, which will be the seventh Amazon location in the state. It is scheduled to open in late 2021. New warehouses are also being planned in Florida.

These types of developments are likely to be seen with increasing frequency over the next few months. In particular, the repurposing of retail locations into ‘last mile’ cross-docks is likely to be extensive and quite brutal on its impact of the property market. Of course, what is behind this is the violent shift away from conventional retailing and towards e-retail based home delivery. Even grocers are now desperately expanding their capacity in this area.

The implications for logistics service providers are substantial. Those specialising in the operation of conventional retail logistics are inevitably going to suffer, whilst providers offering technology intensive solutions may benefit, although it is noticeable that there is a trend towards consolidation in the market, with a few very large players dominating provision.

Source: Transport Intelligence, July 28, 2020

Author: Thomas Cullen

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