WHAT GOES AROUND COMES AROUND BUT USUALLY FOR A DIFFERENT REASON

Recently, Prologis announced they would be building the first multi-story warehouse in the United States. Some of our more senior readers will realize that is not quite true. They may remember when it was not uncommon for warehouse operators to utilize multi-story buildings, usually no more than 3 or 4 stories high. Products and equipment were moved from and to loading and unloading docks at ground level by elevators large enough to hold a forklift and its load. To say they were inefficient would be an understatement but they were cheaper to build and did not require as much land as today’s single-story giants. In spite of their shortcomings, multi-story buildings were operated with a reasonable degree of efficiency for several decades.

Today, In Asia, multi-story buildings are much more common than they are in this country.  Several years ago, my company opened a distribution center located on the 6th floor of Asia Terminal located at the port of Hong Kong. Each floor in the terminal was accessed by a ramp that would allow trucks and containers to load and/or unload on the necessary floor. Although trucks were smaller and had a shorter turn radius than those we have in the U.S., there was no need for elevators and the operations in such facilities were fairly efficient. The major reason for building a large terminal that could not achieve maximum efficiency was to conserve capital. With the over the top land prices in a city such as Hong Kong, the decision to build up rather than out was not a difficult one. The multi-story distribution centers being planned today are to a certain extent, a product of high land costs, but this is exacerbated by the need for more E Commerce facilities. According to Supply Chain Brain, E Commerce distribution requires three times as much space than conventional operations.

The Prologis building will be located in Seattle, and will have three stories. The bottom two will have truck ramps on each floor, and the third floor will be accessible by elevator.  Obviously, the third floor will not be as productive as the other two but the planned use for that floor is “lighter scale warehouse operations”.  Other similar   buildings are being planned on the East Coast, as well.

Without knowing all the costs involved, i.e. land, robotics, and construction, the planned facilities seem to me to be somewhat of a compromise. With the robotic capability we have today, buildings can be almost as high as we want them to be. For example, Future Electronics in Memphis distributes its products from a 60-foot-high, fully automated warehouse. Amazon, the patent holder for “the warehouse in the sky”, now is considering a warehouse skyscraper. That is a bit of an overreach, but certainly possible.

One of the major issues with these small footprint buildings will be having the necessary truck docks. While products may fly around the vertical warehouses at will, at some point they must get in and out of the facility. The best design would seem to be a high-rise picking area, adjacent o a more conventional shipping and receiving space.

In any event, I believe we will see more innovation in warehouse design than we have seen in the past 20 years. If E Commerce continues to grow at the current rate and customer demands increase exponentially, the result will be more facilities in major markets where land costs will continue to increase, as well.

Written By: Clifford F. Lynch