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JLL, Quiet Platforms pioneer flexible rent model, scale fulfillment network
In the first half of 2022, heightened e-commerce demand and limited warehouse supply were the prevailing trends.
Then, in October, Prologis further validated that narrative, reporting that occupancy tightened, more leases commenced, and utilization of space was at the 95th percentile historically during the third quarter. Currently, nationwide industrial vacancy rates are sitting at all-time lows.
All of that activity means tenants have been forced to pay more for space. As of October, Prologis said industrial rents were up 28% versus an expected increase of 11%, and the firm anticipates mid-to-high single-digit growth in 2023.
But two companies may have found a way to keep costs down for the tenants that need it most. On Monday, real estate giant JLL and American Eagle Outfitters logistics subsidiary Quiet Platforms announced a partnership to open new e-commerce fulfillment centers that use a flexible, rent-as-a-percentage-of-revenue payment model.
“We’re excited to partner with Quiet Platforms and seek opportunities that deliver a flexible transaction structure,” said Kris Bjorson, international director of industrial brokerage for JLL’s Americas business. “To support the company’s goal for a responsive, dynamic network, we’re uncovering creative solutions across corporate subleases, retail to industrial conversions, and even speculative industrial developments.”
Typically, logistics property owners will offer leases with the same, flat rate to any tenant looking to rent. But JLL and Quiet’s model will use a sort of rent curve. Tenants initially pay the market rate on a per-square foot basis, but only for the portion of the facility they utilize. As usage and revenue grow, they then have the option to add more square footage at the same rate.
Essentially, landlords who work with Quiet are leasing the firm space with a built-in option for growth.
Watch: Are logistics capacity constraints here to stay?
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Quiet’s network is designed around cutting logistics costs for brands and retailers through a shared network of logistics assets and industrial properties. Its “click-to-door” edge computing network also helps customers strategically position inventory to align their supply chain costs with volumes on different channels, like e-commerce and wholesale.
American Eagle CEO and Executive Chairman Jay Schottenstein has described Quiet’s platform as the “anti-Amazon,” with a focus on greater accessibility for smaller brands.
“We’re pleased to partner with the real estate experts at JLL to accelerate the growth of our facilities network through a unique, variable-expense model that offers more flexibility at the real estate level,” said Shekar Natarajan, president of Quiet Platforms.
Quiet is one of several nontraditional players to enter the supply chain space in recent years, joining companies like Gap, TikTok and Microsoft. Some observers worry these firms will struggle to integrate with retailers’ tech stacks in order to send and receive data — and to assure clients they are still in control.
“Today’s merchants have to be selling everywhere consumers are shopping,” explained Brian Gallagher, chief product officer of Ware2Go. “They need a fulfillment platform that’s going to fit seamlessly into their current tech stack and allow them to manage their end-to-end operations from a single access point. They don’t have the time or resources to build a custom integration into these existing platforms, and that could be a major deterrent.”
Quiet, for its part, does not share client data with American Eagle, which could help it maintain customer trust. Clients also have full visibility into their supply chain operations, an American Eagle spokesperson told The Wall Street Journal.
The firm’s inventory control, transportation optimization and parcel consolidation services should also give it a boost over some of the other nontraditional companies entering the industry.
“The best or leading technology platforms and services will continue to focus on creating a fulfillment network that is self-correcting and self-optimizing for inventory placement and order orchestration — not only for shortest distance to the customer, but also [service-level agreement] performance,” Gallagher said.
Click for more Modern Shipper articles by Jack Daleo.
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Editor: Jack Daleo