As ecommerce drives a surge in demand for logistics real estate, the warehousing and fulfillment operations of B2B companies need to focus on three critical things: location, innovative technology and labor.

BenConwell-Cushman-and-Wakefield

Ben Conwell

To some, shopping in-store may seem as outdated as spending Friday night scouring the shelves of a video store. And while many Luddites still see a benefit in hand-picking their groceries or physically trying on a pair of new sneakers, it’s impossible to ignore or deny the explosion of ecommerce in recent years.

There is tight competition for space that can deliver adequate power for modern automation in B2B warehouses and distribution centers.

The trend is undeniable, and almost all the focus has been on direct-to-consumer ecommerce. It’s true—that story is remarkable. Having grown steadily at approximately 15% per year in the United States, DTC online sales are now approaching the mid-teens in the share of total retail sales.

However, the under-told and larger story is the business-to-business world of ecommerce. While DTC may get the headlines, B2B gets the dollars. And with less focus on its growth and impact through the years, many are unaware of this booming market and the massive impact it’s having on stakeholders, including those in logistics real estate.

Smart wholesale, manufacturer and distributor players have been bulking up their online presence. In fact, 72% have some ecommerce presence, and 80 percent say their B2B eCommerce business is growing, according to a recent survey by Unilog.

advertisement

This surge has a direct result on logistics real estate. For instance, Cushman & Wakefield tracks more than 20% of our industrial absorption to be driven by ecommerce users, and we know B2B takes up a significant share of that market.

The competition for a physical footprint

When compared to DTC, many business professionals may perceive B2B ecommerce as a model that requires very different real estate and supply chain needs. B2B isn’t in the headlines as much as B2C, and the path to purchasing a $100,000 piece of specialized equipment may instinctually feel more complex than the path to purchasing a pair of running shoes.

But in reality, the demands of procurement professionals doing online DTC business are frequently the same demands expressed for logistics real estate professionals supporting a booming B2B sector. DTC and B2B ecommerce operations have many of the same concerns and compete for the same types of real estate.

Considerations for industrial real estate that serve this boom include:

advertisement

Location – Success will increasingly depend on building an optimized distribution network, likely with multiple distribution centers and locations in significant population densities. Over the past year, we’ve seen rent for warehouse and distribution logistics space increase at more than twice the rate of overall industrial space—and there’s no denying ecommerce plays a role in this demand.

Vacancy numbers for industrial real estate, however, remain at historic lows of 4.8%, indicating a willingness by businesses to prioritize location in order to minimize other costs.

Transportation expenses, for example, are a significant cost for any operation in this space, and the objective here is to shorten delivery time and reduce shipping costs regardless of whether you’re selling to another business or an individual.

For B2B ecommerce, it’s also just as important to have the right inventory in the right place at the right time as it is for DTC. And in many cases, speed of availability is even more critical when it comes to B2B. While an individual may be disgruntled about a delayed shoe delivery, a delayed B2B delivery could mean going without a specialized and critical operations tool that could hold up an entire supply chain.

Technology and material handling innovation – In the US, 60% of available logistics space is more than 20-years-old, and logistics space makes up a whopping two-thirds of the total industrial inventory. With the rising demand for B2B logistics real estate, distributors must consider the age and function of a warehouse or distribution space.

advertisement

Inside warehouses and distribution centers, we’re continuing to see rapid advances in technology and material handling innovation, not the least of which includes leveraging booming innovation in robotics and automation.

There is tight competition for space that can deliver adequate power for modern automation, efficient ceiling heights for vertical stacking, and floor loads, column spacing, and floor plans that accommodate current and future innovations in automated material handling equipment and racking systems.

Ample truck, trailer, and outbound delivery vehicle parking and maneuverability room are also just as important in the B2B space and will continue to be critical as autonomous vehicles enter the scene.

Labor – Despite technological advances and considerations, machines aren’t replacing humans just yet. Labor availability is another key consideration when it comes to warehouse site selection for B2B ecommerce that can’t be overlooked. Depending on the product type, each individual order still needs to be fulfilled, and that takes skilled labor to pick, process, and pack those orders for the business on the receiving end.

It’s clear that significant similarities exist between the needs, challenges, and strategies in the online DTC and B2B ecommerce markets. And with its massive size and tremendous un-tapped share of potential growth in the near-term, B2B ecommerce is a story we should all keep an eye on.

advertisement

We are in the thick of a transformation, and to be sure, the disruption in the online B2B space is far from over.

Ben Conwell is senior managing director and eCommerce and Electronic Fulfillment Advisory Group Lead at Cushman & Wakefield.

Favorite