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Tuesday, July 10, 2018

The Last Mile May Be Taking a Vertical Leap

By Rand Stephens (Houston)
The growth of e-commerce over the last ten years has exploded.  In 2008, less than 4% of national retail sales came from online ordering.  Today, the Census Bureau of the Department of Commerce reports nearly 10% of total retail sales is from e-commerce.  The first quarter 2018 e-commerce increased more than 16% from last year’s first quarter and there are no signs of slowing down as online giants like Amazon, Walmart and Target continue to thrive.  We are a click or a swipe away from ordering products and having them delivered within 24 hours, or in some cases, within two to four hours.  With consumer demand for instantaneous delivery on the rise and with people willing to pay more for the convenience, how will that impact last-mile distribution facilities?

Most industrial real estate is concentrated in distribution centers around heavily populated major metropolitan areas such as Atlanta, Chicago, Houston, New York City and Dallas.  E-commerce is primarily driven by a specific demographic of those populations – millennials.  Millennials have grown up in a world of instant gratification.  And now that they have aged and are earning a living, they can sit on their sofa, download a movie of their choice in a matter of seconds, while shopping for the latest fashion trends or groceries and have them in hand the next day.  Getting goods to this growing consumer base in the shortest amount of time is the challenge that supply chain logistics and the industrial market are now facing.

Georgetown Crossroads multi-level warehouse in south
Seattle opens later this year - Courtesy of Prologis
Land proximity to urban centers is limited and costly, but companies must get closer to their consumer base to ensure customer satisfaction and stay competitive.  Thinking outside the big-box warehouse model, Prologis developed an innovative solution – make it vertical. The 580,000-square-foot, three-level, first of its kind warehouse in the United States is set to open later this year just outside downtown Seattle. It will have ramps for truck access to second-floor loading docks and a freight elevator that will connect the third floor to ground floor loading docks.

Multistory warehouses are a new concept in the U.S, but they are common in Asia, Australia, Singapore and Japan.  Will this be a trend that we see more of in industrial markets across the country as delivery lead times are reduced to satisfy the “must have it now” economy?  Companies are already exploring tight urban spaces such as New York City and the San Francisco Bay Area for possible multistory warehouses.  However, the cost for these types of facilities comes at a high price – rental rates for the Prologis warehouse are as much as 50% higher than standard warehouse rates.

This may or may not be a trend coming to Houston any time soon.  However, the city currently has 20 warehouse buildings in the downtown area, with only one 15,000-square-foot space available, according to our research.  Last mile logistics and the innovative impact it will have on distribution warehouses will be interesting to watch over the near future.

 (Rand Stephens is a Principal of Avison Young and Managing Director of the company’s Houston office.)

Wednesday, July 4, 2018

North America is Falling Behind

by Amy Erixon, Toronto

“There is no time to lose”
Pope Francis, “Energy Transition and Care of Our Common Home”. 

The week of June 3, 2018 was a potential bell-weather for climate education, featuring a 2-day climate action summit at the Vatican - attended by glitterati including leading global oil executives and decision makers from the world’s largest investment houses, and a concurrent North American event: the Canadian and World GBC’s joint conference on climate action held in Toronto, Canada.  Despite the record attendance at both events, and carefully researched and professionally delivered presentations from academic, political and business leaders, the week was also punctuated with the election in Ontario of a Premier committed to fighting Canadian climate action and the Trump team repudiating the G-7 joint statement (including climate action) in Quebec.   

North America appears to be politically mired somewhere between confusion and denial, but the rest of the world has moved on from debating the compelling economic, employment and environmental benefits of clean energy and is moving quickly into the post-carbon world.  This includes the leading oil and gas economies, such as Saudi Arabia, Venezuela and Iran.  

Leading corporations around the world, from tech companies such as Apple and Microsoft to traditional companies such as Kellogg's, General Motors, Walmart and JP Morgan are already net zero for operations.  These business leaders will tell you they are motivated less by altruism and attracting millennials (which are reasons sometimes cited for “going green”) than by compelling market economics, and downside risk mitigation.  Renewable energy and battery technology have been riding Moore’s Law, getting much cheaper and more efficient every day, (improving 70% on both dimensions in just the past 4 years) and at utility scale, (unsubsidized) now represent the cheapest, and generally the most local, source of power - everywhere. Corporate CEOs say that being energy self-sufficient is a good way to insulate their firms from the (more than academic) risks of divisive politics making an even worse mess of national energy policy.   

Political upsets in many places are aggravating an already difficult long term planning process in which the inputs and circumstances are changing very rapidly.   This disconnect between government and business leadership seems reflect the fact business is better equipped to incorporate technological change in modeling and adapting to technology upgrades and changing economic realities.   

A few highlights from the Toronto conference included the plenary session I moderated, where Mark C. Jacobson, professor of civil and environmental engineering at Stanford, and Director of its Atmosphere/Energy Program delivered a carefully researched and detailed roadmap based on existing technology and cost structures for immediate transitioning of the entire world to 100% renewable energy with battery backup.  This transition would result in: 1) lower overall electricity costs, 2) net increase of 24 million jobs worldwide (net of lost carbon-based fuel employment), while 3) guaranteeing seasonal and peak grid stability, and 4) lowering costly, unfunded health related hazards associated with carbon based fuels.  You can find his research here:; and at

A second speaker, Piers McNaughton, Associate Director of the Healthy Buildings Program at the Harvard T.H. Chan School of Public Health, provided an academic and inspiring look at the longitudinal research into the role of high performance buildings in supporting human health, wellness, productivity and “presentism”.  These findings are remarkable, with as much as 78% lower absenteeism, 46% reduction in allergy symptoms and headaches, 70% improvement in worker satisfaction and 56% higher worker productivity tied to improved acoustic, light, comfort and ventilation generally associated with “green” buildings.  His research is available on the T.H. Chan School website.   In Europe health factors inform parts of the zoning code.  In North America, business is leading the way to secure more healthy, happy workers via leasing and building properties providing high levels of environmental performance. 

The job of managing governmental decision making would made be easier if carbon pricing transparently incorporated the cost of treating ill health effects and environmental damage of burning fossil fuels (which today functions as a hidden subsidy to industry).   More people would feel comfortable converting to renewable power if they realized 1) it is less expensive, 2) battery technology has improved dramatically, and 3) used batteries no longer head to landfills, but instead can be used to power city lights and schools which have lower voltage requirements.   More education around the causes and solutions to the ill health effects is badly needed.

With the promulgation of data about the state of technological innovation and cost of renewables, together with health and wellness benefits and new job creation, taking bold climate action shouldn’t be so difficult.   How best can we deliver this information over the clanging denials of certain current populist leaders?  After all, there is no time to lose. 

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