The new economy is materially effecting the development of warehouse and distribution centers throughout the United States. This new trend is leading to new emerging hub centers and new types of warehouse and distribution centers.

Much of this change is the result of new efficiencies brought on by globalization and a liberalization of trade policies. Large-scale distributors, trying to maintain less inventory and to deliver it more quickly, are building new, more efficient facilities. In addition, they are turning to third party logisticians to achieve maximum efficiency to perform supply chain functions.

All national economies are becoming more global. This has been brought about from the liberalization of international trade policies arising from GATT, NAFTA and other trade agreements and treaties. This trend is likely to continue, as exemplified by the Bush administration's recent efforts to expand NAFTA across Latin America. Already, this liberalization has seen the total value of imports and exports grow from $600 million in 1980 to more that $2 trillion in 1999. Air freight has grown even faster as a result of lower weight, higher value shipments. Maritime freight has also expanded. Keep in mind, however, that trucking still handles more than 80 percent of the total domestic distribution tonnage.

As trade volume has increased, several key gateway cities and areas have emerged as the clear leaders: New York and northern New Jersey, Los Angeles, Chicago, Miami and San Francisco, for example. These key markets captured 60 percent of all air freight, and the bulk of maritime shipping. A large population and excellent access are the catalysts. In addition, Memphis is now emerging as a new key central U.S. distribution center, largely as a result of its FedEx hub. Other air freight hubs are sure to follow. Seattle-Tacoma is also a growing maritime hub. Multimodal transport is the common characteristic of these key distribution hub markets: air, sea, road and rail. Fully integrated freight centers for all modes are being tested in North Carolina. Location still matters.

To gain higher efficiency, logistics management is playing a larger role. These third party logistics companies are growing at a 20 percent rate per year as a result. Already, we are seeing consolidation in the industry to achieve better efficiency. In addition, companies that have inventory control technology, like FedEx, are also entering the market. This has led to warehousing being consolidated into fewer, but larger, regional distribution centers on the one hand, and on the other hand, there has been increased demand for high through put fulfillment centers at the end of the logistic chain to meet "just on time" demand. Laser bar code technology has enabled this trend.

These large regional centers are 500,000 to 1.5 million square feet with a clear height of 30 to 32 feet. Very flat floors are necessary to handle advanced materials handling equipment. The smaller centers are in the range of 100,000 square feet, plus or minus 20,000 square feet, and some are even smaller. To achieve high through put, shallow depth and high door-to-square-foot ratios are common. Clear height is less important. Retail sites are even used in business to consumer supply chains for fulfillment. Seven to 11 stores are used in Japan, and local packaging stores such as Mail Boxes, Etc. are used in America.

Common to both types of warehouse facilities are ESFR sprinklers, wide truck courts, trailer parking and wide band communications links. Higher usage, measured by hours-per-day and days-per-week, are usual, and cross docking is common. Broad channel telecom access will be increasingly necessary as instructions are delivered digitally.

Smaller and wired warehouses with e-commerce in mind will be more and more common. Access to bandwidth will be a must. These warehouses will also be move automated to support a pick, pack and ship. They also require more power than the old norm. Back-up power is becoming common. Many of these warehouses will also operate 24 hours a day, seven days a week.

Shipping high value, time sensitive purchases will also change location analysis. Quick access to air will become paramount. The heavy development around the Miami and Memphis airports are examples.

The tight labor market has also impacted design. Employee-friendly picnic areas, break areas, higher parking ratios, landscaping and visual design give a competitive advantage to owners. Day care centers, convenience stores, restaurants and auto repair centers in close proximity are a key plus.

There have been many changes in warehousing and logistics over the last decade. That trend is likely to persist and accelerate as information flow, product design, work force mix and workflow design continue to evolve. This forces developers to seek maximum flexibility in the design of future developments.

The market is likely to continue to change quickly to meet new demands in response to technology innovations and other market factors. Success will come to the informed and the nimble.

Real Estate Investment Analyst George Livingston is founder and chairman of Realvest Partners, Inc. in Maitland, Florida.

©2001 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.