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While there will always be a need for large, centralized warehouses, the growing demand for faster deliveries and more resilient energy supplies is forcing companies to rethink where they locate their warehouses.
In fact, 91% of business leaders say their retailers and logistics providers “urgently” need a more decentralized fulfillment network to meet delivery expectations. Prologisin partnership with Harris Poll. More than 1,800 business leaders from the US, UK, Germany, India, China and Mexico responded.
“Because we’re focused on the end of consumption, we’re very specific about not just the most dynamic consumption centers and the most dynamic population centers around the world, but which submarkets of those cities we want to focus on, because it’s all about getting closer to those rooftops,” said Dan Letter, CEO of Prologis.
According to the survey, fewer companies plan to maintain their existing global footprint, with their share dropping 14 points from a year ago to just 36%. As consumer expectations increase, they want fast delivery above all else. Same-day delivery is the goal, and the share of companies offering same-day delivery has doubled since 2019. Research shows that speed is paramount when it comes to gaining competitive advantage.
As a result, companies are mixing up their relocation strategies, with more than half doing both diversification and regionalization, and about a third nearshoring and reshoring.
“So we’ve been very focused on where our portfolio is. We talk a lot about the size of our portfolio, but actually over the last 15 years we’ve also sold a fair amount of real estate. Just real estate that we’ve heard from our clients that that wasn’t their long-term vision. So even though we have 1.3 billion feet, we actually sold over 200 million feet because that wasn’t what the client was looking for,” Letter explained.
Energy infrastructure is also increasingly strategic, with energy resilience becoming a key concern, partly due to the influence of artificial intelligence. Electricity reliability ranks first in determining logistics locations. Just over a quarter of executives surveyed said they expect industrial landlords and developers to lead or fund on-site energy resiliency infrastructure. This includes solar power generation, energy storage, and vehicle charging.
“We really got into the energy side about five years ago and turned it into a business,” Letter said. “We generate over 1.4 gigawatts of electricity through our solar and storage businesses, and we have also focused on how we can help our customers electrify their vehicles.”
AI can help businesses become more competitive, especially when it comes to logistics and warehousing. Respondents said demand forecasting and agent AI systems are some of the most “transformative technologies” in reshaping supply chains over the next three years. Three-quarters of those surveyed said they plan to make major investments in AI demand forecasting as well as inventory replenishment.
“As they got deeper into AI, we got more involved with them,” Letter said. “We’ve invested with our customers to understand what’s next, which helps us in every aspect of our business and allows us to stay one step ahead of our customers.”
