• 30 percent of all retail will be online by 2025, almost four times today.
  • Tenants also need to be close to an ample supply of seasonal or “surge” labor.
  • Preferably in right-to-work states.

E-commerce has been the fastest-growing segment of the retail market for the last four years and can be expected to be a large share of the market for the next 15 to 20 years. Fulfillment centers have become the new face of industrial warehouse development, according to panelists at the ULI Fall Meeting in Chicago.

E-commerce growth rates “are off the charts,” said logistics consultant Curtis Spencer of IMS Worldwide in Webster, Texas, who cited a National Retail Federation report that says e-commerce enjoyed growth rates that were nearly six times greater than those of traditional retail.

Amazon alone nailed a nearly 40 percent growth rate on revenue of $62 billion, Spencer said. That explains why the company is planning to build 17 distribution centers totaling 95 million square feet (8.8 million sq km) throughout the United States over the next three years. That’s in addition to the 52 centers Amazon already has.

“There’s another behemoth on the block,” the marketing supply chain consultant said, comparing Amazon to Walmart. And others like Target and Home Depot are not far behind, he added.

Spencer estimated that 30 percent of all retail will be e-commerce by 2025. Currently, it commands just 8 percent. But even so, one-third of the demand for big box space last year “was tied to e-commerce,” he said.

Spencer said some of the key elements of site selection when it comes to such facilities are their proximity to major markets, inexpensive land, adjacency to Fedex and United Parcel Service hubs and “reasonable proximity” to Interstate highways. The closer to the Fedex and UPS hubs, the better, he said, but they should be no more than five to 20 miles (32 km) away.

Tenants also need to be close to an ample supply of seasonal or “surge” labor, he said, preferably in right-to-work states.

Jinger Tapia of Ware Malcolmb described the design specifications likely to become in demanded for e-commerce fulfillment centers, a design for which her Oak Brook, Illinois-based international architectural firm won an award recently from the National Association of Industrial and Office Parks.

The cutting-edge design features a loading zone spine down the middle of the building, with a sorting zone on either side and storage on either side of that. It also has a central command center and operating vertical lifts that can handle entire trailer loads of goods.

Because the 1.95-million-square-foot building (181,161 sq m) is 84 feet (25.6 m)tall, it is classified as high-rise, Tapia said, noting that the design is “meant to be a conversation starter” when talking to clients about getting product in and out as fast and as inexpensively as possible.

For now, though, the footprint for e-commerce distribution centers is “not a lot different” from ordinary distribution centers, according to James Ford, a project executive at Clayco, a full-service turnkey real estate, architecture, design-build, and construction firm based in Chicago.

At the same time, Ford added, transportation is key–the “end-most” important factor. “Design is only incidental,” he said. “It’s all driven by convenience.”

He also said e-commerce structures, which are sometimes known as omni-channel or multi-channel fulfillment centers, require far more employees than traditional spaces and, therefore, they require four to five times more parking. And that doesn’t include the parking needed to accommodate trailers.

But over and above that, Ford said, the amount of automation required inside the buildings is the real cost driver. “Its those guts that make the difference,” he said.