The Right Location Boosts Last-Mile Deliveries in Major Cities

Q: What key advantages do vertical logistics parks offer compared to traditional solutions? 

A: In cities like Mexico City, it is not feasible to find 10,000m² or 15,000m² plots that can accommodate a traditional warehouse, so we opt for verticality and build upward. By doing so, we maximize and fully exploit every plot of land, always prioritizing the logistical aspects, which are the most important.

Major cities are complex in terms of organization and zoning. It is crucial to find plots of land that allow for vertical construction. The most important aspect of verticality is location because that is what enables efficient last-mile logistics and distribution. 

Q: Considering vertical logistics parks are not common in Latin America, what were the main challenges to pioneering these developments?  

A: We have been developing in many cities for 18 years, focusing mainly on Mexico City. Over the years, we developed vertical housing, commercial spaces, and built-to-suit projects for retail. In 2019, we noticed that vertical warehouses have been popular in Asia for 20 years. In the United States, many underperforming suburban shopping centers have been converted into last-mile delivery warehouses. It seemed a good idea to adapt this approach to Mexico.

We initially thought that adapting this idea to Mexico City would be easy, as we already knew how to build and purchase land, which requires a deep understanding of shape and zoning. We soon hit a wall due to the significant logistical and infrastructure challenges. We first tried to replicate the Asian model, but realized that transportation in Asia is entirely different. We also realized we could not simply use a cookie-cutter approach, as with traditional horizontal industrial development, because each plot of land is different. 

Vertical warehouses can be built on plots as small as 1,500m² or as large as 10,000m². Designing the logistics within the park is crucial. Our parks are multitenant, which requires coordinating all tenants to operate efficiently through cargo elevators. We now have learned how to operate, and our parks have been successful. However, designing and engineering are complex as they require managing yards, floor loads, docks, and heights, compounded by Mexico's stringent regulations. Our first project took 18 to 20 months of study just to understand how to develop it, considering transportation, regulations, and zoning. Once we learned how to make it work for Mexico City, we started creating a more standardized approach. 

Q: What added value do Mexican companies gain by operating in a vertical logistics park? 

A: They gain the ability to improve delivery times by up to 70%. Our solution stands out whether the client is a large e-commerce institution or a small business needing rapid customer access within Mexico City. The State of Mexico has significant commercial and industrial warehouses that offer similar benefits. However, larger enterprises have infrastructure advantages, whereas smaller or medium-sized businesses need proximity to compete effectively against giants. Our offering appeals to both large institutional clients and SMEs, providing all opportunities to be just a few kilometers away from their end customers.

Q: How did Interlogix select the locations for these parks to bring a logistics advantage to  tenants? 

A: We heavily rely on data to inform our decisions. We have several strategic partners who provide insights about areas of highest consumption and delivery demand. We excel in land acquisition thanks to this data-driven approach. We begin our research at spaces spanning three to six blocks. In Mexico, buying land is an art. If nothing is available for sale in the area, we approach property owners directly. We often encounter challenges such as inheritance issues or probate proceedings. 

Unlike residential projects where criteria such as neighborhood appeal and amenities matter most, our focus is on functionality. It is crucial that a 53-foot trailer can navigate the streets for loading and unloading, a fundamental requirement that shapes our search criteria and leads us to optimal locations.

Q: What technologies does Interlogix adopt to improve the efficiency of its vertical logistics parks? 

A: It depends on each tenant, because each employs different technologies. Some are highly automated and use robotics, while others operate manually. We develop and maintain a specialized park operation system that manages movement through elevators and schedules access times for trailers or vans for each tenant. To do so, we gather data on daily activities within the maneuvering yard, which allows us to anticipate and plan for upcoming weeks. Although operations are typically stable, understanding each tenant's logistics is crucial. For example, if one tenant heavily uses an elevator from 6 a.m. to 9 a.m., we ensure another tenant with similar needs does not overlap in the same area.

Q: What are the environmental advantages of operating in a vertical logistics park? 

A: First, by being completely within the city, we significantly reduce our clients’ carbon footprint by minimizing transportation distances. We are also actively promoting electromobility among our clients, further decreasing emissions from our trucks. All our parks have solar panels and collect and reuse rainwater. We capture and treat rainwater in cisterns for reuse within the park. We are committed to environmentally sustainable practices throughout our operations.

Q: What challenges and opportunities does Mexico City pose regarding last-mile deliveries?

A: The appeal of the city lies in its adaptability across various zones. The key challenge is pinpointing where these functional zones are located, which is a significant advantage. Vertical developments will increase. There are abundant opportunities not only in Mexico City but also in other densely populated cities across the country. Our primary challenge remains finding suitable land. Our properties prioritize logistics and energy efficiency.

The main hurdle lies in locating suitable sites. Developing a vertical park, from acquiring land to operational readiness, takes 24 to 30 months, which is much longer than the construction of horizontal warehouses. Vertical construction in urban settings brings unique challenges, particularly concerning subsurface conditions, like those in Mexico City. In some areas, we must use pilings as deep as 25m to 30m to support the structure in our parks, far more than typical office or residential buildings.

Q: What are the company's expectations for its recently inaugurated Interlogix Postes and its project pipeline?

A: Interlogix Postes is almost fully leased out, even though leasing began after its inauguration in June. Postes is expected to reach full occupancy in the next two to three months. We have started closing contracts for projects that are at about 20% completion, but already have occupancy commitments ranging from 50% to 70%. We are planning to build six new locations in Mexico City, effectively doubling our current capacity. 

Vertical construction plays a crucial role here because a 15,000m² park in Mexico City is considered large, whereas the same area horizontally in the State of Mexico or another city would seem small. Our projects focus on efficiency rather than size. We are exploring two 20,000m² projects in southern Mexico City, where space is in high demand. We foresee substantial growth over the next three years as we pursue these opportunities. 

Q: What are Interlogix’s overall plans for the next six years? 

A: We are expanding our focus on last-mile logistics, which are essential in any city. We are not only looking at vertical parks but also well-located traditional horizontal parks within cities. Verticality only becomes necessary when land scarcity forces us to densify smaller plots. We are considering about 40,000 m² in last-mile parks in other cities and expect to announce new projects in three to four months.

Our clients are increasingly seeking smaller spaces rather than large cookie-cutter warehouses. This shift allows us to develop parks of 15,000m² to 20,000m² that accommodate from 10 to 20 tenants. Managing logistics in these smaller, horizontal spaces can be complex as it requires efficiently using smaller spaces tailored to the needs of AAA clients.

Interlogix is a developer and operator of vertical logistics parks in Mexico’s main cities, including Mexico City.