The Distribution/Fulfillment Center of the Future

SPECIAL INSERT Development WINTER 2013 The Distribution/Fulfillment Center of the Future

Riddell Kurczaba

Ware Malcomb The Distribution/Fulfillment

“Distribution is broken.” That’s the frank assessment of Brook tribution/fulfillment centers increases, providing an opportunity to re-evaluate Melchin, senior architect at Riddell Kurczaba, one of the winners the concepts of how DCs can function of NAIOP’s 2013 Distribution/Fulfillment Center of the Future com- more efficiently and where they should petition. “In an era of liquid digital communication, the traditional be located. structure and roles of physical warehousing and retail distribution Interestingly, the two winning con- exist in a state of flux. New modes of consumption (e-commerce, cepts represent opposite ends of the spectrum. The Ware Malcomb concept m-commerce, and s-commerce) have challenged the role of the begins with a structure that has the traditional retail storefront and put strains on the infrastructure large footprint typical of DCs; its innova- tions are focused on materials handling and distribution systems which support it.” within the building. Brady explains: “We started the design process by With dizzying speed, the distribution distribution is hindered by slow lead asking, ‘what if?’ What if we could game has changed, from getting goods times, inefficient transport of goods, and make the distribution buildings more in distribution centers (DCs) to retail poor inventory management,” Melchin efficient? What if our current technology stores on schedule to getting goods elaborates. “It is an archaic distribu- is being underutilized?” directly to consumers now. In the new tion model built on a fragmented and online shopping paradigm, consumers, inefficient network that cannot meet In contrast, Riddell Kurczaba envisioned already accustomed to instant gratifica- the increasingly tight time frames for a vertical DC suitable for an urban tion in other areas of their lives, expect delivery to consumers.” setting. Its “Swarm” concept moves ever-faster delivery of the products the storage and distribution functions they order. While Amazon’s “same-day delivery” into the core of a 25-story mixed-use model may — sometime in the future — building, which also houses residential, Speaking for Ware Malcomb, the other be jettisoned as not sustainable from office, and retail space and integrates winner of the 2013 Distribution/Fulfill- a profit perspective, today’s businesses goods movement that makes use of ment Center of the Future competition, — and distribution centers — find existing transit systems such as metro Matt Brady, regional vice president, themselves challenged to follow Ama- and light rail. concurs. “Consumers’ expectations for zon’s lead in compressing the time it receipt of goods have increased from takes to get goods to consumers. Despite these two very disparate visions, several days to ‘next day’ or even to three common themes emerged in both ‘same day.’ Although sophistication of Three Themes Emerge proposals. Tomorrow’s DCs will be: product handling has improved, the These global distribution challenges instantaneous expectations are straining • Nearby; affect commercial real estate in two the current distribution/logistics model.” ways. As online sales increase, demand • Green; and for brick-and-mortar retail continues to Every link along the supply chain is • Agile. decline. Meanwhile, the demand for dis- weakened by these demands. “Retail

During the spring and summer of 2013, NAIOP conducted a design competition in which it sought concepts for the Distribution/Fulfillment Center of the Future. NAIOP invited architects to conceptualize and design the physical “goods exchange” structure that will accommodate distribution, fulfillment, and retail functions in the year 2020. An independent panel of judges evaluated the submissions against an objective set of criteria regarding how well the proposed concepts achieve the highest and best use for target users and meet the space utilization trends of the future.

The winning firms are Ware Malcomb, with offices across North America, and Riddell Kurczaba, based in Calgary and Edmonton, Alberta, Canada. Presentations made by the two winners of the Distribution/Fulfillment Center of the Future competition at Development ‘13 in San Diego will be available at www.naiop.org.

2 Center of the Future

Nearby (PV) farm that will supply the building creased or decreased as conditions war- with clean power. Skylights and the PV rant. A company could grow or contract, Perhaps the simplest way to decrease panels provide natural light for workers for example, and would even be able the amount of time it takes to de- in the office space and materials han- to relocate its offices from one building liver goods to consumers is to move dling areas below. Horizontal projections to another, in the same or a different distribution/fulfillment centers closer to along the sides of the building combine city, by packing up its pods and moving population centers. But today’s massive a design element with a sustainability them. Residents would have the same horizontal structures must be adapted if feature, capturing rainwater for non- flexibility when their households grow or they are going to pencil out with urban potable uses while also enhancing the shrink. If desired, both office firms and development economics. Higher land aesthetics of the building facade. residents could shift their belongings costs will have to be offset by increas- into long-term storage space. ing density. As Ware Malcomb’s Brady Riddell Kurczaba’s vertically oriented elaborates, because consumers expect concept is built around a large central This emphasis on flexibility opens the goods to be delivered more quickly, core that encourages passive ventila- door to buildings that can stand the test “distribution centers will be closer to tion. Locating the structure in an urban of time. consumers and consequently will have setting enables the use of rail networks smaller footprints. The speed of the to reduce the volume of truck traffic on Meeting 21st flow of goods will need to increase and roadways. Products would be delivered cannot be accommodated by current to consumers within a smaller area, Century Demands material handling practices.” which could even be accomplished by A successful distribution facility hums bicycle couriers or — in some cases — with activity 24 hours a day, as goods Moving DCs to city centers also will on foot. are continually received, processed, and reduce some of the delays in transport- shipped out again. Speed and accuracy ing goods currently caused by traf- Both winning concepts also incorporate are a given, at every step of the process. fic congestion and weather. Riddell green roofs and rooftop gardens, and the But today’s businesses and consumers Kurczaba’s Melchin notes that “as cities sun-facing sides of both buildings have are demanding even quicker turnaround. move toward goals of greater density and integrated PV panels. Consumer expectations for ever-faster consumers’ demands increasingly blur delivery times will require the DCs of the lines between digital and physi- Agile the future to be located closer to those cal consumption, we foresee a shift in consumers and/or to logistics partners The teams at both Ware Malcomb and supply chain management away from within the logistics chain (i.e., FedEx Riddell Kurczaba incorporated flexibility peripheral metropolitan distribution via and UPS). time-consuming and inefficient vehicle into their design concepts. Realizing travel into city centers, toward a focused that population centers can shift over Locating traditional large-footprint DCs model of distribution that moves target time — and that land uses might evolve closer to consumers and/or established product storage closer to consumers.” from one use to another — the archi- distribution markets, however, will mean tects envisioned buildings that could contending with higher land values and While this is a novel concept today, change function. Although both begin as infrastructure investment costs, both warehouses were once a common part clearly industrial structures, either could of which could decrease development of the cityscape. “The vertical urban be reconfigured to accommodate differ- profitability. Accordingly, higher density warehouse represents in many ways ent uses in the future. and more vertical development must be a return to the roots of warehousing,” considered in order to bring DCs closer Ware Malcomb’s horizontal design calls Melchin reminds us. “At the turn of the to consumers. If they are to be accepted for clear heights of 14 feet, floor to floor, 20th century, warehouses were much by city zoning officials as appropriate to accommodate a “mid-life refresh” for taller than they are now, and they were in more residential settings, these large the building. The facility’s central spine located along existing infrastructure industrial buildings also will require could be removed to create different channels [near] the retail providers they more attention to exterior aesthetics and floorplates for office space or a shopping would service.” design features. The visions presented mall, for example, or that area could in the two winning submissions demon- be used to provide green space or park- Green strate a way forward. n ing. The skin on the building facade is Both winning concepts envision that comprised of several types of modular the sustainability movement already panels, which could be replaced with underway in commercial development glass panels for more conventional uses Congratulations will gain momentum in the distribution/ like office space. fulfillment centers of 2020. to our winners: Riddell Kurczaba’s vertical concept Ware Malcomb’s horizontally oriented takes agility to the next level with the Ware Malcomb structure takes full advantage of a large notion of mutability. Its DC concept in- Riddell Kurczaba roof by outfitting it with a photovoltaic cludes residential and office uses within the building. These are configured as pods, the numbers of which could be in-

3 Ware Malcomb Doubling the Through-Put of a Distribution Center The Vision As Ware Malcomb designers grappled with the challenges of land costs, proximity to custom- ers, and aesthetics, they set several goals for their concept. They wanted it to be holistic, creative, modern, and sustainable. In ad- dition to visual appeal and func- tionality, the building concept had to offer financial advantages. They also aimed to give the building’s developer/owner strategic Goods move from end to end through the benefits, long-term value, and the The system is designed to work as center of the building. Streamlining the flexibility to adapt the building to follows: queuing and loading/unloading processes changing market conditions. • Trucks will enter the site and drop minimizes the need for trailer storage, trailers in the queuing zone. Truck allowing for a tighter site. The Elements cabs then will continue around the In a conventional DC, products enter site to pick up departing loads. Arrival from truck trailers through dock doors of trailers can be synchronized with along one side of the building. Once internal operations or on-site “jockey The Office Command inside, they are stored in like groups cabs.” and then exit through dock doors at the Center on High • Jockeys will shuttle goods to an opposite side of the building, back onto In typical DCs, the office area is at one articulated bridge crane that will load truck trailers. end of the building, often in a corner. the entire trailer or container onto an In Ware Malcomb’s DC, the main office adjustable-height conveyor comprised Flow is limited by forklift speed, interac- function is relocated above the floor, of modular scissor lifts to accommo- tions with people, and the inefficiency directly over the central conveyor line. date height variances in trailers and of large blocks of storage. The areas This provides a “command center” for containers. The conveyor will move where people and handling equipment personnel engaged in daily operations. loads through the facility during the can connect to load and unload goods From these operation areas, or control unload/reload sequence at a consis- are relegated to the perimeter of the centers, hanging below the roofline, tent, optimized pace. building — potentially the farthest staff will be able to monitor the entire away from the desired stored inventory. • Employees — and, eventually, robots internal distribution process below. Outdoor maneuvering space also affects — will remove and sort loads onto The location of the office function high the velocity of material handling, which robotic storage and retrieval dollies. above the floor also will give office work- is further limited by truck traffic. Sites Goods will be stored on and retrieved ers views of the exterior roof gardens often are congested with idling trucks from multiple levels via robotic and provides access to natural light waiting to be loaded or unloaded, a conveying systems and machines. from overhead. condition that wastes fuel and spews The placement of each product will carbon emissions. be computerized for optimal retrieval Natural Light and time and restocking sequence. To Ware Malcomb, the solution to this Modular Panels situation seemed clear: “We need to Ware Malcomb’s concept incorporates Glass stair towers at the perimeter of decrease loading/unloading times and the container/trailer into the picking the building will provide pedestrian decrease distance to goods,” explains process. This innovation provides many access to the various levels inside. Light Matt Brady, proposing a centralized benefits. Initially envisioned as a way will move through the glass, providing conveyor spine to increase productiv- to streamline materials handling, it also additional daylight within the facility. ity and accuracy. “Bringing product reduces the amount of exterior space The towers also will create a more aes- through the center of the building will needed. The ability to develop this DC thetically pleasing perspective for street double the flow of goods by creating two on a smaller parcel with higher floor area traffic and pedestrians. unloading/loading zones focused in one ratio (FAR) provides greater site selec- central area.” tion flexibility in established markets where land is scarce and costs are high.

4 As an adjustable-height conveyor system moves goods through the loading/ unloading zone in the center of the building, robotic picking systems transfer them to the vertical lift stations for storage and redistribution.

Concept Summary Site Area 29.22 acres (1,272,920 square feet) Building Area Footprint 523,200 square feet Mezzanine 1,427,200 square feet (four levels) Total 1,950,400 square feet FAR 1.53 Parking 326 stalls at 17/1,000 square feet Estimated Costs Located high above the floor at the Green Roof $122/SF X 56,000 SF = $6.83 million center of the building, the office Office enantT Improvements $70/SF X 40,000 SF = $2.8 million zone and command center oversee Storage Levels $120/SF X 1,429,200 SF = $171.26 million operations below. Mechanical/Electrical $6/SF X 1,950,040 SF = $11.7 million Solar Panels $122/SF X 300,000 SF = $36.6 million Clear Span Area $110/SF X 166,400 SF = $18.3 million For the exterior skin of the building, Site Work $75/SF X 1,950,400 SF = $13.65 million Ware Malcomb offers several op- Total $261.14 million tions. The building will accommodate traditional concrete tilt-up panels. For greater flexibility and aesthetics, how- system to harness the most economi- fulfillment facility would be developed ever, Ware Malcomb proposes a modular cal, least environmentally impactful near population centers and that, over panel system comprised of three types regional power available and use it in time, a natural gentrification process of panels: solid, glass, and building- the most efficient way. could drive its highest and best use integrated photovoltaic (PV) panels. The • A rooftop photovoltaic farm and build- from e-commerce to office, residential, three types of panels can be designed ing-integrated PV panels mounted on or mixed use. into unique patterns, with varying colors the optimal solar faces. Skylights and and textures, or remain simple to satisfy PV panels will provide natural light To build flexibility into the design, stringent budgets. If the building use and clean power to occupants and they proposed the following: changes in the future — for example, to operations. accommodate more office space — solid • Floor-to-floor heights of at least panels can be replaced with glass ones. • Horizontal projections along the 14 feet to allow for efficient robotic facade will collect rainwater for non- picking, as well as a change of use; Harnessing Solar Power potable uses. This articulated facade • A modular central spine that can also adds a design element to break be removed to create optimal floor- And Rainwater up the long, rectangular shape of the plate depths, a green space amenity, This futuristic distribution facility will facility. and/or additional parking fields; and comprise sustainable features that will • Reconfigurable exterior panels reduce the building’s impact on the en- Flexibility to Refresh that can be replaced with glass vironment. These include the following: At Mid-Life panels suitable for conventional • A state-of-the-art building and heat- Ware Malcomb designed its building to commercial uses. n ing, ventilation, and air conditioning accommodate a mid-life refresh. Its designers anticipated that this e-commerce

5 Riddell Kurczaba The Swarm: Rethinking Distribution The Vision Instead of massive disparate warehouses, Riddell Kurczaba’s Swarm centers represent a new distribution archetype: densified, agile, mixed-use fulfillment centers located at the confluence of transportation networks and population centers. The Swarm system is designed to streamline how products move through the system, speed to market, and personal delivery of goods. The intelligent systems within the building will integrate seamlessly with the external distribution network, creating a sustainable and efficient transport grid. The centers are designed to be built on smart internal and external transportation networks with light rail transit lines at their core. The system has the potential to transform the organization and delivery of consumer goods from the periphery of the city to urban and suburban fulfillment centers.

The Elements to expand or contract their space by increasing or decreasing the number The Swarm center will operate as a of pods (units) they occupy. The pods primary agent within this new Swarm also may be packed up and moved as system. It will have the ability to oper- necessary, both within the building and The Swarm center is a vertical mixed-use facility ate not only as a local warehouse and to other Swarm centers. designed to include retail, distribution, ware- distribution center, but also as a mixed- use facility, offering retail fulfillment, house, residential, and office facilities on the entertainment, office, and residential Blended Multichannel same site. To bring goods closer to retailers solutions. Distribution Network and consumers, Swarm centers will be located “Swarm distribution networks will at rail and transit hubs. Swarm networks will The system is designed to work as follows: become the future of the blended connect multiple Swarm centers, expanding the • The central core of the building is multichannel distribution network as system and extending its efficiencies. organized into a vertical warehouse. A they are integrated with traditional sophisticated network will maintain, supply channels such as roadways and monitor, and replenish inventory waterways,” Melchin explains. “The real The Trade Area shift in the speed and scale of distribu- levels for retailers located at the base The “trade” or retail area will occupy of the building. tion will occur as these networks take advantage of channels that currently and enhance the levels closest to grade, • The “trade” or retail area will occupy are underutilized: light rail transit and and integrate with the urban streetscape. the levels closest to grade or the underground metro systems.” With stores occupying smaller footprints, street. Such close proximity between a larger number and variety of retail retailers and the vertical warehouse Transit ridership in many jurisdictions enterprises will be able to coexist within will lead to smaller retail footprints often is well below capacity outside of the trade area, offering consumers more and give retailers the ability to offer peak commuting hours and, in most choice. hybrid sales experiences, like online cities, service is stopped for much of purchases through in-store kiosks, the overnight period. These off-peak and The integration of retail spaces and the with near-instantaneous delivery to offline conditions create an opportu- vertical warehouse could even change the shopper. nity for jurisdictions to move smaller the way that products are displayed, pur- • The perimeter of the upper-level volumes of targeted goods to Swarm chased, and delivered within the Swarm, floors will be reserved as commercial centers. As goods arrive, retailers can re- enabling the development of several and residential space, for households plenish their supplies and display them; types of hybrid retail environments. and companies seeking flexibility and consumers can locate and purchase/ Goods purchased via the Internet, for liquidity. retrieve them; and contract delivery example, could be picked up at any services (like FedEx, UPS, and even retailer. And showroom floor space for The pod concept is central to Riddell bicycle and foot couriers) can distribute large items like furniture could be mini- Kurczaba’s urban distribution center. them locally. mized; retailers could display one basic Businesses and residents will be able model while stocking the most popular combinations in the vertical warehouse for quick delivery.

6 Goods enter the Swarm Concept Summary center from an under- Site Area 180,000 square feet ground light rail or metro Building Height 25 floors line, located above the Building Area parking garage. They Retail Podium 200,000 square feet are moved by magnetic Vertical Warehouse (two cores total) 200,000 square feet crane up to the internal Shipping, Receiving, and storage area in the build- Horizontal Warehouse 100,000 square feet ing core, where they can Residential 200,000 square feet Office 100,000 square feet be delivered to retailers, Total 800,000 square feet consumers, and short- range delivery compa- FAR 5 nies. The spaces beyond Estimated Costs the central storage core Retail Podium $40 million are intended for retail Vertical Warehouse $40 million Shipping, Receiving, and uses on the lower stories, Horizontal Warehouse $20 million and residential and office Office and Residential $60 million uses on the upper floors. Total $160 million

Typical Retail Floorplate Typical Residential/ is based on the shipping and storage Office Floorplate modules contained in the overall distribution network. Thus, a household that is moving to another city could either move to another Swarm center and have its entire apartment moved with it, or could shift its belongings from prime space into long-term storage space. Sustainability of Locating

A CENTRAL CONTAINER In the Center City DISTRIBUTION CORE The synergies promoted by the co- B ELEVATOR / STAIR CORE C CIRCULATION CORRIDOR The Swarm center’s circular floorplates comprise a central location and consolidation of supply D INTERNAL STORAGE container distribution core that extends vertically through- channel infrastructure, warehousing, SPACE retail, office, and residential functions E RESIDENTIAL / out the entire height of the building. Diverse retail shops COMMERCIAL into a single location result in a number F OUTDOOR GREEN SPACE will occupy the podium at street level, with residential of sustainability benefits: G GRAY WATER COLLEC- TION TUBES FOR IRRIGA- and office space on the upper floors, all accessible via TION WITHIN MULLIONS • Using rail networks instead of trucks exterior elevators. to redistribute materials will reduce the volume of transport truck traffic on roadways, increasing capacity for As individual retail sites shrink, ad- floorplates — is reserved for office and other vehicles and reducing commute ditional options for agility within the residential uses. Some floors may be times. trade center begin to emerge. A retailer designated for business centers and that is busier during certain times of the touchdown space for wireless nomadic • Smaller products can be distributed year will have the option to adapt quickly employees. Established companies from each center into the surrounding within the Swarm to grow and shrink its also could find the building attractive communities by bicycle or on foot, storefront. Conversely, a seasonal retailer because of its flexibility. Large firms that reducing demand on vehicle transport will be able to easily pack up its shop occupy Swarm centers in multiple cities and resolving hours-of-service issues. and store its goods until the next year. would have the option to move office • Swarm center architecture has the Some retailers might decide to aggregate equipment easily from center to center capacity to capture the sun’s energy and operate within a market or design and region to region, enabling them to via the building envelope. center structure, maximizing collective efficiently manage office requirements • The larger central core of the building brand power and diversity of goods to during periods of volatility. Residential encourages passive ventilation. stimulate greater consumer traffic. space could offer similar flexibility, giving residents the ability to increase • Terraces and urban roof gardens can Office and Residential or decrease the size of their space as help improve air quality. n households grow and shrink. Mutability By Sheila Vertino, former editor-in-chief of The prime real estate in the Swarm For both residential and office applica- Development magazine and a freelance writer based in the Washington, D.C., area. — the perimeter of the upper-level tions, the ability to customize space

7 Ware Malcomb

Riddell Kurczaba

2201 Cooperative Way, Suite 300 Herndon, VA 20171 703.904.7100 www.naiop.org