June 13, 2019
Today’s consumers purchase more and more goods online, and it’s no longer only small items. E-commerce has evolved to include big purchases like furniture, refrigerators, mattresses, and even cars. The challenge is that consumers still want fast shipping on those large items. To meet those expectations, retailers are rethinking their supply chain management. They are locating closer to consumers, which is driving up industrial demand in secondary markets.
For example, major consumer product retailers like furniture distribution companies have historically served Texas from Houston and the Dallas-Fort Worth metroplex. Now, however, they also need a significant presence in Austin or San Antonio, and in some cases both, to meet delivery expectations for customers in Central Texas. Surrounded by Houston, Dallas and San Antonio forming the “Texas Distribution Triangle,” Austin has never been a regional distribution market. This means that almost all of Austin’s bulk warehouse space is supporting the area, including last-mile space to support e-commerce.
This method is evidenced by two major furniture groups – Wayfair and Four Hands – leasing 80% of the industrial space at Southpark Commerce Center V, a 350,171-square-foot project by Transwestern Development Company. Both of the furniture distribution companies at Southpark Commerce Center did so to support Austin.
Austin has been the fastest-growing metro in the U.S. for the last eight years, making the logistics for consumer product companies so important. This is compounded since much of the population growth in Austin is from younger generations that are more likely to shop online and expect fast delivery. A younger population translates to many of the home purchases being made by first-time home buyers in need of new items to fill their homes.
The trend isn’t limited to Austin or even Texas, though. Secondary markets with growing populations are seeing similar growth and demand from consumer product users, such as furniture distribution. The nature of the consumer product sector in secondary industrial markets is that inventory is typically consumed in the same market in which it is warehoused. As residents move to secondary markets, they will need more products like everyday goods, furniture and appliances.
This migration into secondary markets has been followed by institutional capital and new development, including a project by Transwestern Development Company in Charleston, South Carolina.
Most secondary markets are within a few hours of primary markets. Retailers that need large industrial warehouse and distribution footprints, such as furniture distribution retailers, have to balance the equation of storing product close to the consumer without taking on too much space.
As a member of Transwestern Development Company’s national Logistics Group, Ben Newell is responsible for the implementation, execution and management of development projects with a focus on the Houston and Austin markets.
- U.S. Industrial Market Research Report - Q1 2019
- Houston Industrial Construction at All-Time High (add link)
- Does an Omnichannel Retail Strategy Drive Profitability?