If you’re seeking distribution space near major markets right now, you might have to think outside the box. Regular rounds of new tariffs on imports from China have caused American retailers, wholesalers, and manufacturers to order and store copious amounts of product and raw material inventory, consequently pushing U.S. warehousing capacity near to its limit. With new rounds of tariffs pending on goods from the European Union as well, it’s likely that the trend of frontloading inventory will continue well into 2020 at a minimum.
This creates a frustrating environment for retailers and suppliers trying to distribute to large markets moving into the peak holiday season. Given the lack of available warehousing space, this blog post will explore more creative methods for distributing into your key markets.
Good warehousing space near Los Angeles, Chicago, New York, or other major metro areas can be hard to come by. Even if ideal distribution space can be found in one of these primary markets, it’s often well out of budget range for small- and medium-sized businesses. However, chances are pretty good that affordable space is available in a nearby secondary market.
For example, if a business is trying to distribute to the Chicago metro area but can’t find reasonably priced warehousing space, they might have better luck a mere 90 minutes away in Milwaukee, Wisconsin. In this example, locating in Milwaukee has the added bonus of convenient distribution access to other population centers, such as Milwaukee and Madison.
Most major metropolitan areas have secondary markets within a reasonable driving distance, so it’s important not to narrow the focus of site selection so tightly that reasonable solutions get missed.
The micro-fulfillment model uses a network of very small distribution spaces, each distributing to a narrow local area. Many instances of micro-fulfillment have cropped up over the past couple of years as traditional space became harder to find.
Examples of the micro-fulfillment model might look like this:
- Blocking off unused dock or storage space in local stores to use as miniature distribution centers.
- Setting up a network of trailers or tents in strategically located parking lots which collectively grant distribution service to a wide urban area.
- Renting vacant, centrally located retail space to act as a small distribution outlet.
While distribution centers often sprawl across hundreds of square feet, that sort of space simply isn’t available in many major cities. Since spreading out isn’t an option, many warehousing operations are looking up instead. Just as residential buildings started to go vertical as populations outgrew the capacity for horizontal living, warehouses have also now started to realize the benefits of vertical space.
Some facilities have optimized existing DC and warehousing space by adding taller racking systems. Others have acquired disused urban buildings with small footprints and quality vertical space and converted them into semi-automated or fully automated distribution centers.
Co-Warehousing and On-Demand Warehousing
Sometimes a warehouse is big enough for multiple tenants. Given the high cost of fulfillment space in big markets, some warehouse owners are willing to share their warehousing space by renting out unused portions to other companies. Though direct collaboration isn’t entirely unheard of between private businesses, co-warehousing is much more common through third-party logistics (3PLs) companies, who often house several tenants in a single distribution center.
It seems every market has developed an “uberization” trend since Uber took the taxi market by storm in 2009, and warehousing is no different. New online platforms have recently sprung up where businesses can rent out their unused warehouse space to other companies. With many landlords trending toward long lease terms for new clients, this might be an ideal option for businesses seeking short-term storage space for new market penetration, peak season, or other surges in demand in specific areas.
Let Phoenix Logistics Help You Find Creative Distribution Space
From leveraging secondary markets to repurposing old factories and other empty spaces, Phoenix Logistics has a great deal of experience helping our customers find the industrial space that they need to reach target markets. For more information on our ability to provide creative options and competitive solutions, please contact us online or call us at (414) 253-8010.
As an affiliate of the real estate firm Phoenix Investors of Milwaukee, WI, Phoenix Logistics has unique access to an expansive portfolio. Phoenix Investors’ Senior Management includes Frank P. Crivello as Chairman & Founder; David Marks as President & CEO; and Anthony Crivello as Executive Vice President. Robert Kriewaldt serves as Phoenix Logistics’ Senior Vice President. For more information, visit phoenix3pl.com.