ATLANTA—E-commerce strategies are constantly evolving, but there are some apparent trends for the coming years. Fulfillment centers are increasingly being located near large population centers and more of them are being located in the eastern half of the U.S. where 70 percent of the nation's population lives. That's a consensus from a panel of real estate service providers and consultants examining key site selection drivers at NAIOP's E.CON.

Moderator K.C. Conway, senior vice president of credit risk management for SunTrust Bank, noted the large capacity in the eastern U.S., freed up over the past few years as the U.S. military wound down operations in Iraq and Afghanistan.

“We're moving from a West Coast-centric model to an East Coast-centric model,” Conway says. “Also, most of the rail connections in the U.S. are in the center and southeastern U.S.”

Another trend is a shift in the size of facilities as they move toward population centers, notes Scott Belfer, a senior vice president at CBRE, who started the company's e-commerce group about four years ago.

“Outside of the Walmarts and the Amazons, most true e-commerce users are not taking million-square-foot buildings,” Belfer says. “But they are looking for sales tax incentives, work force quality and being close to UPS and FedEx hubs so they can ship products at a reasonable cost.”

Belfer says other considerations include whether states have right-to-work laws and their inventory tax situations. “All of these things come into play. You can't just say, hey, let's throw up a building.”

Mike Mullis, a Memphis-base site selection consultant, notes that that not all e-commerce functions are created equal. He says most of his clients are just using a portion of their distribution centers for e-commerce. The one key driver in every decision, he says, is labor.

“It's driven by the ability to ramp up with seasonal labor,” Mullis says. “There are certain pockets around the country where you have that ability. That's what's driving decisions for our guys, on top of all the other things. You can have everything, but if it's a crappy labor market, it's not going to be successful.”

Amy Gerber, an executive vice president with Jones Lang LaSalle, handles incentives related to site selection. She says JLL is getting a substantial amount of the cost of e-commerce centers covered with facilities. She notes that they cost more to build and require a more sophisticated infrastructure. This represents a positive aspect for cities and counties because it raises their tax base. She cites a recent one million square-foot, $100 million project where JLL negotiated a $6.7 million state grant, which will go directly towards material handling equipment costs for the project.

“All of these facilities are air-conditioned,” Gerber says. “That's one of the reasons they are costing more. Almost all of the time we have to put in new rail spurs. We tell states, 'If you can help us, we are more apt to be locating in your community than anywhere else.'”

Responding to a question from the audience asking about the most aggressive southeastern states in terms of incentives, Gerber cited Tennessee, Georgia and South Carolina as being the most aggressive.

“North Carolina is in a free fall and having all sorts of problems,” she says. “Georgia has an inventory tax, so companies can go to South Carolina and not have that worry. We look at the tax differences first. Alabama is doing its best to turn things around legislatively.”

Belfer notes that Florida is a big market for e-commerce, in part because of its population of seniors in the Miami area. He says companies are locating fulfillment centers in the Atlanta area in order to serve Florida and other points in the Southeast.

Gerber says there is an opportunity for port authorities on the east coast to become involved in the site selection process. These agencies are also another potential source of funds for project incentives, she says.