News release

Could “the Airbnb of logistics” ease the industrial space crunch?

The relentless rise of same-day delivery has merchants on the hunt for warehouse space close to their urban customer base. Strong demand has made industrial real estate increasingly hard to find. And even when space is available, it's typically not found in the city center, but instead in sprawling sheds the size of football fields in the suburbs.

May 04, 2019

The relentless rise of same-day delivery has merchants on the hunt for warehouse space close to their urban customer base. Strong demand has made industrial real estate increasingly hard to find. And even when space is available, it's typically not found in the city center, but instead in sprawling sheds the size of football fields in the suburbs.

"Because customers today demand such fast delivery when they order online, companies need more smaller locations rather than fewer larger locations," says Rich Thompson, who leads the global Supply Chain & Logistics Solutions team at JLL. "At the moment, this isn't really the way things work."

"The 'Airbnb model for industrial warehousing space' allows companies to be nimble enough to respond to seasonal changes and compete in the age of e-commerce," Thompson says. Seattle-based FLEXE is the first of a handful of such startups, connecting companies in need of warehousing space and flexible fulfillment options with a network of warehouse partners that have excess capacity and are willing to provide the needed warehousing services.

"As e-commerce companies seek to get closer to their customers, many are not able to justify leasing their own facility or it does not make sense given the seasonal aspect of demand, so the flexible model is an option for those companies that simply did not exist before," Thompson says. "It's a market niche because companies can now access locations in a new way, which creates greater flexibility and efficiency across the supply chain."

According to surveys issued by FLEXE in the US, up to 30 percent of warehouse space is underutilized at any given time. Most lease agreements don't allow firms to rent out these spaces to those who need it. A new, more flexible model provides a solution. This is especially true for companies that need a lot of space during a certain season because they can profit off their real estate portfolios during the off season.

For instance, think about a Christmas tree decoration retailer in November suddenly inundated with product, but the space they lease sits unused in warmer months. Meanwhile, a pool-accessory manufacturer is in need of that square footage during summer.

"If a business is forecasting it will grow by 20 percent in four years, and it signs a five-year lease, there is going to be a lot of empty space in year one. The flexibility also helps companies that lease large amounts of space with the expectation of growing into it over time." says Karl Siebrecht, co-founder and CEO of FLEXE.

"The on-demand warehousing market for industrial warehousing is relatively new and most companies are just beginning to understand how it works," Thompson says. "The other hurdle is cultural. Many companies still prefer to have full control over their operations."

Still, as more companies enter the space, the flex space model could "take some of the friction out of near-term imbalances or unplanned shocks in supply chains," says Aaron Ahlburn, Senior Director of Research at JLL. "It could make shipping goods to customers a more seamless process."

Stephen Wyatt, Country head of JLL Vietnam, comments on the trend: "Over the past few years we have seen an increase in co-working operators enter the market, therefore, it is only a matter of time before we see a flexible approach to leasing warehouse space. Especially with the strong demand from the ecommerce sector requiring smaller/flexible warehouse facilities for the fastest "last mile" delivery. We believe the flexible approach to warehousing could be very successful in the Vietnamese market and this is something that JLL will be monitoring closely in the future. A flexible warehouse space solution could be the answer to a number of existing problems in the industrial sector. Industrial space in the country has high occupancy rates and rents, if a flexible approach enter the market, I'm sure there will be strong demand from many businesses."

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