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01/10/2022

Designing and Planning for Hybrid Retail, Dark Stores and Urban Warehouses

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As we approach a third year under the shadow of COVID-19, companies, developers and investors are still measuring the significant impacts the pandemic has had on commercial real estate, retail businesses and the global supply chain.

The abrupt and lingering disruption has left many wondering what the accelerated explosion of e-commerce means for the future of these industries and how the changes inform and integrate with modern lifestyles. However, in the midst of trying to understand the long-term effects and exploring new and alternate business models, it’s clear that retail warehouses and fulfillment centers continue to play a critical role in the business supply chain and are an essential component for everyday living.

According to CBRE’s 2021 Global E-Commerce Outlook, an estimated 330 million square feet of additional warehouse space will be needed solely for online fulfillment by 2025. To satisfy growing stocking and product movement needs and last-mile delivery demands, warehouses are finding their way into the urban landscape, and existing storefronts are experimenting with micro fulfillment center conversions.

As retail business models and industrial settings evolve, the right layout and design can be the difference maker for maintaining positive experiences and standing out amongst a growing sea of competitors.

Blurring the Line of Retail and Industrial
Pandemic-spurred consumer demands have ushered in a new hybrid retail model in which physical spaces combine traditional, in-person shopping with micro fulfillment centers for last-mile deliveries.  Largely adopted by big-box brands, this fusion trend will continue to shift floor plans to optimize the use of available space.

To determine which direction makes the most sense for a store and, inherently, how to properly modify a space, first consider its location and building type. Buildings with higher ceiling heights and in locations close to freeways and/or around less traffic make it easier to accommodate large trucks for more fulfillment use and with a subsequently smaller retail footprint. Conversely, stores anchoring malls or in locations accessible to smaller vehicles are generally better for in-person shopping and individual fulfillment.

Dark Stores, the New Dark Horse
In places where a hybrid model doesn’t make sense, some brands have fully converted into “dark stores.” A dark store keeps the brick-and-mortar location, shuts down the in-person shopping experience, and then turns the real estate into a fulfillment center or “micro warehouse.” This type of asset utilization allows a company to redistribute funds toward other investments, such as building or growing ecommerce platforms, making improvements for quicker distribution and incorporating advanced technologies.

Strategically placed at easily accessible locations, dark stores help fulfill quick orders and can utilize a variety of delivery methods, such as in-store pickup, curbside pickup and home delivery. Instead of supporting curated in-store customer experiences, dark stores are designed for increased efficiency and built to accommodate a full range and high volume of goods.

In addition to traditional retail, big store grocery brands are starting to utilize this model as these businesses heavily rely on SKUs for inventory.

Dark stores have also helped contribute to the explosion of Q-commerce or “quick commerce” – an evolving global sector predicated on the use of fulfilment centers. The apt term refers to a growing channel known as on-demand or rapid delivery in which consumers receive items in the same day and as quickly as under an hour. Industry newcomers, investors, as well as existing retail and grocer brands in need of third-party help with storage and fulfillment, are finding allure in the Q-commerce model for adapting and repurposing existing spaces to updated uses.

Smarter Warehouses, Smarter Logistics
More and more, logistics facilities are relying on technological advancements, like robotics, artificial intelligence and automation, to increase predictable activities and optimize the handling of space and materials. To support current market conditions while also ensuring warehouse facilities are equipped to operate beyond today, warehouse facilities will do well to consider ways to incorporate flexibility into their design and layout.

Investing in supplemental power and strategic building enhancements can help a warehouse seamlessly transition into a next phase of operation.

A flexible design can also help a warehouse facility adapt to potential future tenant occupants as many corporate companies note the possibilities for sharing multiple micro-distributions throughout cities to be closer to end users. Applying critical- and forward-thinking components to “the big picture” for long-term success is especially important when it comes to addressing unique complexities and challenges around urban infill and adapting existing spaces for different uses.

Sustainability – The Greener, Better Warehouse
Warehouse facilities are not traditionally known for sustainability. But green building techniques and LEED principles are increasingly being leveraged as a strategy to support overall business operations and elevate projects to new levels of design and functionality. Proximity to consumers and end-user occupants reduce the amount of emissions generated to and from an urban warehouse, making them inherently less damaging on the environment, and using solar panels and cool roofing can reduce the building’s total energy consumption.

Installing efficient lighting systems and motion sensors in the interior can greatly extend time between replacements and also reduce heat gain, both resulting in lower overall facility maintenance costs.  

The trend of weaving fulfillment centers into our urban fabric is essential for seamless livability and one that is sure to remain even after the pandemic lifts. Every company’s need for warehouse space and last-mile delivery is different and dependent on several variables, which can be a challenge to route though COVID uncertainty and beyond.

Working with the right design partner is critical in navigating an ever-evolving landscape. Professionals with experience and expertise in the areas of urban infill, retail and industrial will be able to approach projects through a big picture lens to ensure the functionality and longevity of your overall business.

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