logistics space

Multistory Warehouses Usher In New Era Of Urban Logistics

Tentative steps to revolutionize the way warehouses are conceived and designed are being made in the United States.

No longer do they need to be gigantic spaces on a single floor. Instead, they could be multistory structures with docks on more than one level.

A handful of such facilities already exist in the U.S. or are in the process of construction. Indeed, according to a new report by Leslie Lanne, senior managing director with JLL, 2023 marks the five-year anniversary of multistory warehouse development in the nation. This new category of buildings even has its own name: “urban logistics.” Amazon’s need for distribution centers is helping drive some of the growth.

“Multistory warehouses have been used in Asia for more than two decades, and a few such structures are also to be found in Europe,” Lanne said. “The most remarkable is a 22-story warehouse in Hong Kong, but most draw the limit at five floors.”

The first and perhaps best-known example in the U.S. is Georgetown Crossroads in Seattle. Developed by Prologis in partnership with Craft Architects, it consists of a three-level, 590,000-square-foot warehouse. There are 62 dock doors on the first level and 38 on the second. The third level contains a makers’ space. The building features truck ramps leading to the second and third floors, served by forklift-accessible freight elevators for lighter-scale warehouse operations, according to Prologis.

“The multi-staged parking levels allow for efficient streamlining of the queuing process of delivery trucks when using fleet vehicles for last-mile delivery operations,” Lanne explained.

Prologis is now in the process of building a far larger project, the San Francisco Gateway, consisting of two 97-foot-tall structures totaling 2.16 million square feet across three floors and a rooftop deck. Each level will be reached by a one-way ramp that can carry tractor-trailers. It will also offer retail and maker space. Prologis says the development will provide much-needed space for production, distribution and repair (PDR) businesses to evolve.

In New York, 2505 Bruckner, a 1-million square foot multi-story warehouse opened in 2022, claims to be the largest, most efficient urban industrial facility in the city. There are now five existing multistory buildings in the New York City boroughs and another five under construction, according to Lanne.

“The projects under construction and in the planned/proposed area of the pipeline total 9.4 million square feet of additional last-mile logistics space in New York City,” Lanne stated.

A 1.2 million-square-foot, two-story warehouse located at 1237 W. Division, in Chicago, is the most recent project to break ground. It is scheduled for completion in 2024.

“While the U.S. multistory and urban logistics landscape is currently very much in its infancy, there is tremendous potential in the future of multistory and urban logistics in both the established urban logistics markets and emerging logistics markets,” Lanne stated.

Established markets include Boston, New York, Philadelphia, Mid-Atlantic, Chicago, San Francisco and Los Angeles. Atlanta, Miami, Dallas, Houston and Seattle are among emerging markets.

For success, proximity to major air and seaport hubs is paramount, as industrial real estate relies on the efficient movement of goods, Lanne noted. Population density is another factor. Efficient site planning and careful layout of the loading docks and parking are vital.

Developers also face other challenges. They include outdated zoning laws, scarcity of available land and financing, and significantly higher construction costs.

“The cost to build a data center typically ranges from $125 per square foot to $200 per square foot, while the cost to build a multistory asset is roughly two times the cost of a single-level asset,” Lanne said.

Source: GlobeSt

Industry News

The Pursuit Of Unclogging The U.S. Supply Chain Has Helped Industrial Investment Outperform The Rest Of CRE

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If there’s one thing the pandemic shed a spotlight on, it is how the global supply chain was not ready for an influx of consumerism.

Ships were backed up at some of the world’s largest ports, meaning that hardware, car parts and furniture were absent from retailers’ usual inventory.

Richard Thompson, international supply chain director at JLL, summed it up earlier this year when he said, “The pandemic exposed how fragile our global supply chain was when reliant on one region. A more regionalized model allows companies to be nimbler when problems arise.”

Industrial real estate investors have benefitted from the pivot to a regional supply chain focus. The asset class has outperformed almost all other commercial sectors. During the past two years, JLL found that industrial investment activity picked up across the entire spectrum as automotive companies continued diversifying their footprint. And as supply chain logistics move to nearshoring and reshoring, investors are snatching up regional industrial space opportunities, especially near busy ports.

For example, Miami-based real estate and investment firm Black Salmon, in partnership with InLight Real Estate Partners, this week announced the $103 million disposition of Hicks Transload Facility, a Class A truck terminal and trans-loading warehouse in the Port of Savannah, the country’s third busiest port, as well as the disposition of Rex Distribution Center in Atlanta, Georgia.

“There was a tremendous amount of volume in Savannah and the state has invested billions into the port, so we found there was a lot of opportunity for us and it was just a matter of finding the right property,” Black Salmon Managing Director Stephen Evans told Benzinga. “The site in Savannah was perfect for a truck terminal. This wasn’t about warehousing. The trucks come in on one side, empty their containers and then transfer the materials to the next destination.”

According to a June report from Motley Fool, industrial commercial real estate has grown 10.3% in the past 12 months, led by demand for logistics space and limited available real estate. The vacancy rate for industrial is also the lowest in commercial real estate (CRE) at 4.3%. That performance, which is outshining the multifamily and office sectors, is fueling the present and future investment strategies of companies like Black Salmon and InLight.

“Our firm focuses primarily on industrial real estate, although it’s a type of CRE which has a different set of fundamentals that we’ve been working with since the beginning of the company,” InLight Principal Matt DiLeo said.

DiLeo also noted that industrial investors for specific property uses aren’t necessarily looking for new, high-end properties.

“We are building a value add and bridging the gap with the older facilities who need a tenant that doesn’t necessarily need all the bells and whistles,” DiLeo said.

As for the future of industrial investment, Evans is bullish and says he has already raised funding for the next year of targets.

“If I were to pick one single product type today to invest in, it would be industrial,” Evans said. “E-commerce has been the huge disruption in the industrial supply chain, and capitalizing on that disruption and how it impacts the space, has allowed us to reap the benefits.”

Source: yahoo!finance

Industry News

Could Higher Gas Prices Have Ripple Effects For Retailers, E-Commerce Leasing In Industrial Market?

Retailers, third-party logistics firms and e-commerce groups alike are eating up the most big-box warehouse space in today’s red-hot market.

Retailers and wholesalers accounted for the most industrial deals at 200,000 square feet or larger last year, or 35.8% of all leasing activity, a considerable increase from 24.7% in 2020, according to CBRE Group Inc. E-commerce fell from the No. 1 spot in 2020 to third last year, accounting for 10.7% of all deals, while 3PLs grew from 25.8% to 32.2%, ranking No. 2 among large industrial leases in both 2020 and 2021.

Propelled by a surge in online ordering, and changes to consumer preferences in part because of the pandemic, retailers and 3PLs have ramped up their distribution networks considerably in recent years. That demand is expected to be sustained this year, and could become even more frenzied with the recent surge in gas prices.

The cost of regular gas has risen nationally 20.9% in the past month, from an about $3.50 a gallon to $4.32 on Tuesday, according to figures from Heathrow, Florida-based American Automobile Association Inc.

James Breeze, senior director and global head of industrial and logistics research at CBRE, said transportation accounts for at least 50% of a typical industrial occupier’s costs, even before the recent hike in inflation and oil prices. But, largely because of sanctions imposed on Russia from the war in Ukraine, oil prices have risen dramatically, although Brent crude futures — a key benchmark for oil prices — just began to decline. National gas prices were down 0.2% between Monday, March 14 and Tuesday, March 15, according to AAA.

“Any run-up in transportation costs will likely outpace warehouse rent growth, even while that’s growing at a rapid clip, which could result in even more demand for warehouse space,” Breeze said.

Carolyn Salzer, senior research manager of industrial logistics at Cushman & Wakefield PLC said higher gas prices could have a ripple effect on the industrial market, depending on the user and their supply-chain model. Both Salzer and Breeze said real estate costs for warehouse users have typically been about 5% of a company’s costs but, more recently, that’s gotten closer to 10%, Salzer said.

“If you bite the bullet and pay the more expensive rent to be close to the population center, and be more competitive with the labor pool and provide easier options for commuters to get to where you’re located, it can cut your transportation costs on gas and mileage in general,” Salzer continued.

Cushman & Wakefield is forecasting rent growth for warehouse and logistics space will rise by more than 15% in the next two years. Class A and new construction rents are anticipated to grow at an even higher rate. Those rental surges are creating a squeeze for some users, with tenants looking at lease terms sooner than what’s typical, or negotiating an early renewal or a smaller extension to resize a facility or consider real estate farther out, Salzer said.

But, Breeze said, for most industrial users today, higher rental rates generally aren’t causing companies to hit the brakes on expansion because they need the space to store inventory and lower transportation costs.

Salzer said she anticipates e-commerce users will occupy about the same share of the market it has since the pandemic, or 40%. That’s compared to 28.2% of all industrial absorption from 2016 through 2019, according to Cushman. Many retailers are opting to work with 3PLs to bolster their supply chains, which will continue to comprise demand in 2022 and beyond.

“CBRE so far this year has seen ramped-up leasing activity for groups that deal in building and construction materials, as well as medical supplies, which typically represent a lower share of the overall warehouse market, Breeze said. “That’ll likely mean a more diversified occupier base this year.”

Source: SFBJ

Industry News

Permanently Altered Industrial Sector Will Drive Demand For 4B SF: Prologis Report

The coronavirus pandemic has reshaped the global logistics market in fundamental ways, spurring its long-term growth, but also putting new stress on the system as consumers adopt online retail sales more quickly than they might have otherwise, according to a new report by industrial real estate giant Prologis.

That could lead to demand for 4B SF of new logistics stock.

The report, “Forever Altered: The Future of Logistics Real Estate Demand,” said perhaps the main driving force in change for the industrial sector will be the accelerated growth in e-commerce. Though the pandemic will end, that will remain as one of its prime legacies.

E-commerce penetration will continue to be robust post-pandemic for a number of reasons. One is that many consumers overcame barriers to e-commerce during the pandemic, and they aren’t going back, the report says.

Also, innovation and supply chain investments made during the pandemic will hone the competitiveness of online options for retailers. That will be especially the case for retail segments with low e-commerce penetration before the pandemic, such as grocery retailers and home improvement specialists, Prologis predicts.

“Consumer expectations have increased in a permanent way,” the report notes. “Prologis Research forecasts that global e-commerce penetration will rise by 150 basis points a year over the next five years. Physical retail will increasingly require rapid replenishment operations to compete.”

Growth in consumption-oriented uses will drive growth in logistics real estate, even as production-oriented uses decrease, Prologis also found. Consumption is now the main driver of demand for logistics space on the global level, with retail sales having a higher correlation with logistics demand growth than more traditional uses of such space, such as manufacturing or wholesale trade.

These changes will naturally mean opportunity for industrial real estate owners and developers, but there will also be growth pains in logistics going forward.

“The resilience of the supply chain is being tested as companies expand globally, in turn driving the need for modern stock and decentralized networks,” the report notes. “Coupled with a rising consumer class, this worldwide upgrade should generate the need for 3 to 4B SF or more of modern logistics stock over the next cycle.”

Source: Bisnow

Tag Archive for: logistics space

Multistory Warehouses Usher In New Era Of Urban Logistics

“Multistory warehouses have been used in Asia for more than two decades, and a few such structures are also to be found in Europe,” Lanne said. “The most remarkable is a 22-story warehouse in Hong Kong, but most draw the limit at five floors.”

“The multi-staged parking levels allow for efficient streamlining of the queuing process of delivery trucks when using fleet vehicles for last-mile delivery operations,” Lanne explained.

“The projects under construction and in the planned/proposed area of the pipeline total 9.4 million square feet of additional last-mile logistics space in New York City,” Lanne stated.

“While the U.S. multistory and urban logistics landscape is currently very much in its infancy, there is tremendous potential in the future of multistory and urban logistics in both the established urban logistics markets and emerging logistics markets,” Lanne stated.

“The cost to build a data center typically ranges from $125 per square foot to $200 per square foot, while the cost to build a multistory asset is roughly two times the cost of a single-level asset,” Lanne said.

The Pursuit Of Unclogging The U.S. Supply Chain Has Helped Industrial Investment Outperform The Rest Of CRE

Richard Thompson, international supply chain director at JLL, summed it up earlier this year when he said, “The pandemic exposed how fragile our global supply chain was when reliant on one region. A more regionalized model allows companies to be nimbler when problems arise.”

“Our firm focuses primarily on industrial real estate, although it’s a type of CRE which has a different set of fundamentals that we’ve been working with since the beginning of the company,” InLight Principal Matt DiLeo said.

“We are building a value add and bridging the gap with the older facilities who need a tenant that doesn’t necessarily need all the bells and whistles,” DiLeo said.

“If I were to pick one single product type today to invest in, it would be industrial,” Evans said. “E-commerce has been the huge disruption in the industrial supply chain, and capitalizing on that disruption and how it impacts the space, has allowed us to reap the benefits.”

Could Higher Gas Prices Have Ripple Effects For Retailers, E-Commerce Leasing In Industrial Market?

“Any run-up in transportation costs will likely outpace warehouse rent growth, even while that’s growing at a rapid clip, which could result in even more demand for warehouse space,” Breeze said.

Permanently Altered Industrial Sector Will Drive Demand For 4B SF: Prologis Report

“Consumer expectations have increased in a permanent way,” the report notes. “Prologis Research forecasts that global e-commerce penetration will rise by 150 basis points a year over the next five years. Physical retail will increasingly require rapid replenishment operations to compete.”

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