Real Estate Roundup: Apparel merchants search for best logistics formula

Real Estate Roundup is a weekly rundown of developments in the world of industrial real estate used for logistics and transportation. This week: Delta Apparel upgrades in Tennessee; Gap expands in Ohio; QVC bulks up Pennsylvania facility

Clothing stores have been among the hardest-hit sectors of the retail industry over the past couple of years – Forever 21, Gymboree and Payless ShoeSource are a few of the chains that have closed hundreds of stores.

Electronic commerce is the culprit and some apparel retailers are tweaking and strengthening industrial real estate holdings to capitalize on potential efficiency gains from logistics and distribution.

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Delta Apparel, the Greenville, South Carolina-based maker of the Salt Life and Coast Apparel brands, is spending $15 million to upgrade a distribution center in Clinton, Tennessee. The center is located inside the Eagle Bend Industrial Park near Knoxville.

“The distribution facility we own in Clinton, Tennessee… is strategically located to reach a broad geographic area,” Deb Merrill, chief financial officer of Delta Apparel, said during a Nov. 21, 2019 conference call.

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Delta Apparel will add retail packaging operations to the distribution center, allowing the company to service its growing direct-to-retail business, according to Sports Insight Extra. The project will also integrate Delta’s DTG2Go digital print and fulfillment services with the distribution center’s operations.

Additionally, Delta Apparel is moving out of logistics and distribution facilities operated by third parties, including one in Dallas. It has moved some of those operations to centers that the company runs itself, located in New Jersey, Ohio and Texas, the company said in its 2019 annual report.

The Gap Inc., which owns its namesake clothing brand plus the Old Navy, Banana Republic and Athleta brands, is spending $100 million to expand a distribution center attached to a regional headquarters building in Groveport, Ohio, according to the company. The project is expected to be completed by the end of 2022.

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As part of the project, The Gap will construct a 420,000-square-foot warehouse next to an existing 950,000-square-foot warehouse, according to the trade publication Area Development. The expansion is designed to support the company’s growing online business, a Gap executive told the publication.

 The project, which also includes a buildout of the headquarters building, will create 600 jobs in the Columbus, Ohio area. The Gap’s warehouse is located inside Duke Realty’s Groveport Commerce Center.

The home shopping giant QVC Inc. began moving into a new distribution facility in Bethlehem, Pennsylvania, in September 2019. The move-in should wrap up in the third quarter of 2020, according to the Allentown Morning Call.

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QVC’s CEO acknowledged that ecommerce has forced the company to reassess its distribution strategies.

“The fear persists that this business is in long-term decline,” CEO Mike George said during a Nov. 21, 2019 investor meeting. “Fear that there are three boogeymen that will kill this business that we’ve heard for years and years, right? Cord-cutting, Amazon and millennials.”

As part of the decision to move into the new facility, QVC closed fulfillment centers in Lancaster, Pennsylvania, and Roanoke, Virginia, according to a regulatory filing. QVC is leasing the 1.7 million-square-foot center in Bethlehem for 15 years.

The facility is located inside Liberty Property Trust’s industrial park in the Lehigh Valley of Pennsylvania. In October, Liberty (NYSE: LPT) agreed to be acquired by Prologis (NYSE: PLD) for $12.6 billion.

(Editor’s note: Prologis is an investor in FreightWaves)