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6 takeaways from North America’s first multi-story warehouse getting built in Seattle

The Georgetown Crossing project is a first-of-its kind project in North America.  The project, underway now in South Seattle, creates a three-story warehouse, a project scope never before tried in the US.  The first floor and second floor both have freight trucking access.  The third floor has forklift access and space for “makers,” which sounds like an art loft for artisan manufacturers.

The warehouse will have a significant level of automation, where robots and conveyor belts will do much of the work that manual labor once accomplished.

It’ll get used by companies like Amazon or other digital startups that rely on rapid-turnaround delivery. The bottom line for these organizations rely on timely, reliable delivery.  Given Puget Sound’s traffic, that sort of delivery is not always easy to achieve.

I talked with a few folks close to the project to try to get a better understanding of what this project could mean for the broader Puget Sound economy.  I took a look at some related stories, read some patents filings, and talked with some urban planners to get a sense of what this innovation could mean.

Here are a few key takeaways.

  1. Seattle’s already urbanizing faster than any other city, becoming more densely populated.  This innovation will allow that increasing density to accelerate. In short, population centers need things to support the people that live there.  From toilet paper to televisions.  Currently, much of the warehouse space that holds these goods for population centers tend to be in more suburban or rural areas where land is cheaper.  This distance can be a structural impediment to supporting increased density.But, with traffic getting worse in Puget Sound, itself a by-product of increased density, transportation costs are eroding the savings from cheap, suburban storage.  This means it’s beginning to become cheaper to have more expensive commercial space like the Georgetown Crossing project because those costs may be offset by reductions in transportation costs (both time and money, often viewed through the lens of delivery productivity).
  2. Warehouse space will get much more expensive than it is now.  That won’t translate to higher consumer prices immediately given the other offsetting costs.A broker told me that the market might currently support a $.50 per square foot cost to lease warehouse space.  The Georgetown Crossing project is likely to command $1.00 – $1.10 per square foot, and that leasees are happy to pay it because of the location and utility.
  3. This is very good for the digital “convenience economy.” As Amazon and other online retailers promise quick delivery, warehouse space that is close to the urban center will allow those start-up services and companies to perform better, earning more repeat business, and ultimately continuing to catalyze the way we shop online.
  4. This is a long-term threat to some of the suburban warehouse districts.  I’m looking at you, Southcenter, Kent, and Lynnwood.  You have cheap warehouse space now, but the transportation costs to your consumer are killing you.  This new model of warehousing will threaten the existing warehouse stock over time, and potentially lead to a full redevelopment of some of these areas.
  5. This isn’t great for low-skilled warehouse labor.  New buildings – particularly new, expensive buildings that are capital intensive – will have a great deal of automation.  Many new warehouse spaces built and used today already have a very high degree of innovation and automation. Robots and conveyor belts are moving warehouse workers to the unemployment line.This is more of the same economic displacement we’ve seen over years.  I’d argue it is probably a net benefit to an economy.  But, we are already in a place where the lack of transition support for displaced workers has led to economic anxiety, which in turn is given voice through some abnormal social and political manifestations.
  6. This is only the beginning.  Have you seen Amazon’s patent application for a multi-story fulfillment center where drones fly in and out like a modern day hive?

Warehouse space is not a sexy topic.  But this North American innovation is happening in Seattle first, where the benefits and costs will be borne most immediately.

Consequently, if you’re keeping an eye on the political economy of Puget Sound, this project is worth watching.

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