Historically, industrial real estate has been a popular asset. It is relativity stable, can stand the test of time, has favorable occupancy, a steady demand, longer term tenants, lower maintenance, and lower re-tenanting costs. It has proven this even more so during the current pandemic, with many of the crucial services that were essential pointing us in the direction and showing us the need for even more industrial space.
Since March many states have issued stay-at-home orders which has more people then ever turning to online shopping and convinces such as grocery pickup or delivery services to be able to get what they need while sheltering in place. While e-commerce was already gaining popularity and taking away from brick and mortar stores, the pandemic has shifted this into over drive and will affect the way we operate going forward.
During this pandemic, supply chain operations and industrial warehouses have been the glue that has kept our economy going. It has also shown us that our current system is not strong enough to support a spike in demand. As the need grows for industrial space, business are re-thinking where they are purchasing space and looking for more local locations in order order to enhance their delivery speeds. “Smaller, last-mile industrial facilities are positioned throughout metro areas at a higher volume, allowing retailers to be nimbler in their delivery model and efficiently complete the “last mile” to consumer residences. The progression to last-mile industrial facilities provides insight into where the market has evolved and translates to a significant development opportunity.” according to nreionline.com.
This demand for virtual business is also showing a rise in demand for temperature controlled spaces to accommodate for grocery delivery.
“When examining e-commerce’s delivery logistics throughout the past decade, the average industrial tenant size has decreased, and tenants moved to infill locations as major retailers have shifted their logistics footprints to meet online sales growth. At the beginning of this real estate cycle, retail giants built large distribution centers—often around 1 million sq. ft.— positioned strategically throughout the nation. In recent years, a new wave of the logistics network has unfolded as these retailers started seeking shallow bay, urban and centrally located industrial facilities in order to enhance their delivery speeds.” as stated by nreionline.com.
As markets continue to open, the need for industrial space is remaining constant. The physical space is still needed to stage product, and pack trucks can not be replicated digitally and will more then likely stay the same.
According to a recent article from nreionline.com, “(Bloomberg)—Prologis Inc., the largest owner of warehouses in the U.S., is getting a boost as social- distancing pushes consumers deeper into the embrace of e-commerce.
Companies including Amazon.com Inc. and Walmart Inc. have an “almost insatiable” appetite for more warehouse space, Chief Executive Officer Hamid Moghadam said in an interview on Tuesday. “We’re not seeing those guys slow down, they continue to be very active in making new deals,” Moghadam said. “The strong continue to be taking a lot of space.”
Although nothing is ever a sure bet, as it stands now, industrial real estate is still the stable and consistent asset it has always been. It may even serve as a path forward as we begin to dig out way out of the current situation and lay the ground work for what the future will look like.
Source
nreionline.com [Article] https://www.nreionline.com/industrial/industrial-development-offers-attractive-opportunity-path-forward
nreionline.com [Article] https://www.nreionline.com/industrial/warehouse-giant-seeing-insatiable-demand-amazon-walmart