1M SF FedEx Project Latest Evidence Of E-Commerce Boom
The latest impact online shopping could be having on Atlanta will involve a million square feet of packages in Braselton.
Duke officials declined to comment. This deal comes just months after FedEx announced plans to open a $30M, 235k SF FedEx Ground facility 150 miles northwest of Braselton—in Chattanooga, TN.
“FedEx Ground is constantly evaluating where best to expand our network to meet growing customer demand for our services," the shipping service said in a statement. "We are exploring a number of properties, including a site in Jackson County, as a potential location for a package distribution center. As a matter of practice, FedEx does not publicly discuss specifics of a project until all aspects have been finalized.”
While the specific use for the facility is unclear, it's safe to say FedEx is expanding its delivery capabilities to the Metro Atlanta area through the Braselton facility, perhaps even for its big customer, Amazon.
This is also the latest big industrial deal for Atlanta tied into the burgeoning e-commerce warehouse presence as companies and retailers all shore up their logistic networks to serve the Southeast region.
“Atlanta is among the top logistics and supply places in the world,” says Georgia Tech professor Benoit Montreuil, who is the school's Coca-Cola Material Handling & Distribution chair. Across the globe, Atlanta is viewed on par with a country like the Netherlands. “Everyone who knows logistics understands that the Netherlands are tied to logistics. It's the same kind of logic as to why people go to…Atlanta.”
Atlanta is a strategic location for companies attempting to shorten delivery times to customers throughout the Southeast—and, in some cases, the eastern half of the country via Hartsfield-Jackson Atlanta International Airport. For many companies, Atlanta is a hub for delivering merchandise to smaller fulfillment centers, many of which are only two days of travel from the metro area, Benoit says.
The impact of e-commerce can be seen in the names coming to Atlanta—and across the country.
In recent months, the metro area scored major industrial leases with such names as online retailer Wayfair, Amazon (including its Amazon Fresh division) and online retailer Tory Burch, which recently inked a deal for 753k SF with Panattoni at its Lambert Farms project. JLL's Witt Truitt (here during a recent company soirée for industrial players in Atlanta) and Reed Davis brokered the deal for Panattoni.
Even the recent Williams-Sonoma deal in Braselton (also for 1M SF) could be in part for e-commerce, given more than half of the kitchen retailer's revenues are from online sales, according to a September e-commerce report by Cushman & Wakefield's Ben Conwell (here).
These and many other deals have helped Atlanta industrial landlords lease nearly 11M SF so far this year, pushing vacancy rates down to 8.5%, a low since the dark days of the Great Recession, according to a recent JLL report.
“The reason Atlanta is seeing significantly higher absorption levels over the past few years is most notably due to e-commerce activity,” Colliers International officials note in a recent industrial report. “Retailers are having to grow their industrial platforms in order to handle increased business. This strategy has led to persistent demand for industrial space year-over-year, a lot of which is coming from retailers new to the market; and also from existing retailers needing to expand.”
JLL's Chris Tomasulo (on left)—whose firm brokered the Tory Burch lease—says the firm is tracking another 30M SF in industrial deals of at least 200k SF each, a good portion of which have an e-commerce component. He personally is repping some 2.5M SF of deals eyeing Atlanta, roughly 40% of which are e-commerce related.
For e-commerce providers, Atlanta's trucking industry makes the area attractive for that last-mile effort.
“There are just so many trucking companies that are here in Atlanta that if you're in the logistics business...that really gives you the opportunity to competitively bid your transportation at reduced costs,” Chris says. Our labor costs, cost of living and proximity to the Savannah port and supply of Class A warehouses make Atlanta even more appealing in logistic networks.
E-commerce's impact on the US industrial market is even more impressive. According to a recent Cushman & Wakefield report, 45% of all US industrial deals over 250k SF last year were e-commerce-related.
But for Cushman & Wakefield's James Phillpott, one reason stands above others as to Atlanta's popularity with e-commerce users: “You've got 6 million people in the MSA. I mean, it makes senses. Who's buying all that stuff?” he says. Putting e-commerce hubs in Atlanta helps to lower the cost of delivering things purchased on Amazon.
For Benoit, this surge in industrial growth to solidify online sale delivery systems is really only beginning.
"E-commerce will continue to grow. That's clear," he says. While online only accounted for 7.5% of total reatil sales last year, it's growth has been exponential. Total online sales in 2015 tallied more than $340B, up $43.5B and nearly 15% from 2014, according to the C&W study.
And retailers will continue to rely on their e-commerce logistic systems to give consumers flexibility in picking up orders—at home, at the store, in commercial lockers—and in ever-quickening turnaround times (same day delivery, anyone?).
"The frontiers between normal retail and e-commerce are blurring even more," Benoit says. And with the advent of 3D printing, which can allow some retailers the logistics holy grail—to make, package and send an item from a regional distribution center—“the next five to 10 years are going to be transformative.”