Building The Last Stop
By Andrew Chung and Robert C. Kossar
Increased e-commerce has created a need for high-quality, last-mile facilities in New York City. E-commerce brands and retailers need to fulfill immediate deliveries, which have become a popular choice among consumers. The percentage of e-commerce sales to the total U.S. retail sales more than doubled between 2010 and 2017. Consumers spent $453 billion on online purchases in 2017 up from $391 billion in 2016, a 16 percent increase. Approximately 25 percent of consumers are willing to pay premiums for same-day delivery.
The technical definition of last mile is the last stop before the final trip to the consumer. This last step in the delivery process may account for 50 percent of the cost of transportation. Closer proximity to customers is the bottom line. You can’t build in big cities and solve your last mile problem easily. As the supply chain folks want to tackle the NYC issue, they seek out logistics space in the outskirts of the city. The solution they’re looking for is a modern, state-of-the-art facility in an urban core.
Not All Square Footage is Created Equal
Not all last mile properties are created equal. A mile is not a mile from a delivery-time perspective. Proximity is measured in time and heavily influenced by traffic patterns, delivery truck restrictions and zoning. Businesses might say, “We need to be in Brooklyn,” so they look at other distant locations in Brooklyn, instead of Long Island City in Queens, which is five minutes away from Williamsburg. The education of NYC geography is critical.
The Need for Modern Last Mile
Modern last-mile properties don’t exist. There’s been no development in the urban core in NYC for more than 50 years. There are no modern facilities that have adequate loading, column spacing, ceiling heights and floor loads. Every retailer in NYC is going to be delivering same-day in some shape or form, whether it’s through a third-party logistics provider or on their own.
Different Types of Delivery
We must consider home delivery and commercial delivery. Home delivery has expanded into everything – grocery, prescription, necessities. Then you have luxury goods, apparel, furniture and all the different categories of retail. Urban delivery is governed by a doorman; non-doorman buildings have not been figured out yet. With 8 million people in Manhattan during business hours, there’s an increasing number of commercial deliveries.
The Future of Delivery
The future of delivery is exciting. There may be drone delivery in the urban core. We’re going to see a considerable upgrade in software technology that allows for more predictive analytics and routing. The package is on the way to you before you press the buy button. We will see packages moving pre-order. Prototypes have been created for the delivery van of the future, where people come and collect packages from the van. Businesses need a homebase in the urban core to mitigate risk and satisfy the new era of same-day delivery. If you don’t have a homebase in the urban core, your competitor will.
Andrew Chung is the CEO of Innovo Property Group and Robert C. Kossar is the international director of the Northeast Industrial Region for JLL. Innovo Property Group and Square Mile Capital are building 2505 Bruckner, a new state-of-the-art, multi-story logistics property in the Bronx, NY. Set for completion in 2020, the property features 32-foot ceiling heights, two 130-foot truck courts, floor loads of up to 800 pounds and all modern amenities. JLL is the exclusive leasing agent for 2505 Bruckner.