Last-Mile Warehouse Coworking Concept Raises $10M To Fund Expansion
As more small businesses embrace the e-commerce side of retail, their need for last-mile delivery capability has grown — but the availability of those facilities has shrunk drastically. An Atlanta firm has secured millions in funding as it moves to close that gap.
Saltbox operates coworking for distribution facilities, and it raised $10.6M in a round of Series A funding that closed last week. It plans to open upward of eight coworking warehouses throughout the country this year, co-founder Tyler Scriven told Bisnow.
Saltbox opened a second 66K SF location in Dallas last month after debuting its last-mile coworking concept in Atlanta more than a year ago in a 27K SF facility on the city's Upper Westside.
Saltbox raised funds from venture capital firm Playground Global, XYZ Venture Capital and Wilshire Lane Partners, according to a press release. To date, Saltbox has raised $16.5M for its planned expansion across the country, Scriven said.
Saltbox has some of the same accouterments made popular by the office coworking industry: monthly memberships that allow customers use of not only portions of the physical real estate, but private phone booths, stocked cafés with coffee and snacks, and weekly community events for its members. But the firm also offers other services, such as use of a photography studio or on-demand labor services, where their customers can contract directly with Saltbox to handle order shipments, Scriven said.
Saltbox is tapping into a booming e-commerce market that, despite the dominance of Amazon, is made up of hundreds of thousands of smaller online retailers, many of which can't enter into traditional warehouse leases.
“There are hundreds of thousands of small businesses today who have really been pushed to the fringes of the commercial real estate ecosystem,” Scriven said. “You very clearly come to see there's a very significant underserved market here.”
Instead of direct leases, Saltbox enters into management contracts with partners who own the real estate. One of its partners is Watchung Capital, Scriven said; Watchung owns the Dallas warehouse where Saltbox just located.
While America's retail properties, hotels and offices — especially office coworking — have been challenged by the coronavirus pandemic, the opposite happened in industrial environment, driven by the booming e-commerce industry. Consumers spent more than $860B online in 2020, up 44% from the previous year, according to data compiled by Digital Commerce 360.
That jump in online sales is the highest annual increase in 20 years and surpasses the 15% growth in 2019. As of 2020, 21.3% of retail sales were tied to consumer online purchases, according to Digital Commerce 360.
While Amazon, Walmart and Target have a large market share in e-commerce, smaller companies and mom-and-pop sellers are a growing chunk of the industry, according to e-commerce research firm Pipecandy. There are 353,000 companies selling merchandise online in North America, 88% of which earn less than $1M in sales annually, according to Pipecandy.
Those companies' demand for flexible warehousing is on the rise, said Brad Wright, CEO of Chunker, which helps warehouse tenants sublease their space, akin to Airbnb.
“We have seen a significant uptick over the last six months, even nine months, from those smaller requests,” Wright said.
Experts say industrial landlords cannot cater to mom-and-pop tenants who demand shorter-term leases and much smaller spaces than a typical warehouse tenant, especially at a time when warehouse vacancies are tight across the country.
Wright, who is not involved with Saltbox, said many smaller e-commerce companies are seeking anywhere from 500 to 3K SF, which is hard for traditional warehouse landlords to offer.
“In the world of warehousing, when Amazon is building million-square-foot distribution centers with 75-foot ceilings, 3K SF is really small. The traditional industrial space is not modeled to do any type of short-term deal at all,” he said. “On the other hand, those customers are a perfect customer for a model like Saltbox.”
Industrial landlords generally ignore these tenants because of their desire for short-term leases, King Industrial Realty President Sim Doughtie said. Industrial owners and developers strive for the longest lease terms they can achieve to prop up building values.
“If you're a landlord, why would you do a short-term lease when you can get five- or 10-year terms?” Doughtie said. "That lowers the value of your property."
Third-party logistics providers also overlook small e-commerce companies in favor of bigger companies, said Maximiliano Trujillo, the co-founder of a co-warehousing operator in Doral, Florida, called Palletized ECommerce Hub.
Trujillo said the increasing demand among his clients for flexible warehouse space has led the company to recently expand to a larger facility, growing from 20K to 45K SF.
“We definitely saw a need for these types of services,” he said, adding 80% of Palletized clients are focused on online sales.
Scriven said he sees a runway for growth for the co-warehousing industry across the country. Saltbox is now eyeing expansion into Denver, Seattle and Los Angeles, with an average facility size of approximately 60K SF.
"It is not as though we will have one Saltbox in Atlanta. We will have many over time," he said.