Tag Archive for: warehouse space

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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

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Everyone is becoming more accustomed to seeing small trucks roam their neighborhoods, delivering goods ordered online.

But even as the coronavirus pandemic greatly intensified demand for these services, most municipalities are reluctant to approve proposals to develop new industrial service facilities where distributors and other businesses can store, maintain or dispatch vehicles, heavy equipment or bulk materials.

“Nobody wants to live next to a truck terminal,” JLL Senior Associate Kate Coxworth said. “That not-in-my-backyard, or NIMBY, attitude keeps new supply low, sending rental rates soaring for existing industrial service facilities in markets across the U.S.”

That’s helped in the past 12 months to draw in a new cadre of developers and investors who now see these facilities as an essential component of the rapidly expanding industrial sector.

“These facilities are the skeleton of the supply chain, and there are more people making the discovery that there are real opportunities here,” Industrial Outdoor Ventures CEO Tom Barbera said.

Barbera started Schaumburg, Illinois-based IOV about five years ago, and for most of that time, only three or four other firms specialized in acquiring and developing properties within the niche sector, he said. But things changed in 2021. A new group of six to eight firms is now out there and has made the market for industrial service facilities more competitive.

“And I think we’ll continue to see new folks get involved,” Barbera said.

National investment players have also joined the fray. IOV formed a joint venture in March with San Francisco-based Stockbridge, planning to make between $100M and $200M of acquisitions annually. IOV completed 24 acquisitions in its first four years, but thanks to the new joint venture, it has picked up the pace and has closed 16 new acquisitions since February.

That includes the 39K SF 1401 North Farnsworth Ave. in Aurora, Illinois, a Chicago suburb, and the 22K SF 4212 Perry Blvd. in Whitestown, Indiana, an Indianapolis suburb. Both are 100% occupied by MacQueen, a fire truck and emergency equipment provider that uses the properties for truck maintenance and repair.

“By the end of this year, IOV could close on another 20 properties and be in at least a dozen major metro areas, including South Florida, Atlanta, Chicago, Dallas and Houston,” Barbera said.

 

JLL also recognizes ISF’s growing importance as an asset class, and plans to establish a group of specialists that will handle such transactions, according to Coxworth, who helped represent IOV in the Aurora and Whitestown deals.

“JLL researchers have started tracking the nationwide vacancy rate among ISF properties,” Coxworth said.

It now stands at 3.1%, and with many municipalities expected to continue blocking new facilities, especially in dense residential areas now served by so many delivery trucks, investors can be confident the market will stay tight. In addition, ISF tenants promise steady returns.

“Almost all of the tenants are signing 10-year leases because they all understand that this is a hard commodity to find, and once you do, you better hold onto it,” Coxworth said.

These tenants have shown a willingness to pay much more in rent as the industrial boom continues, according to Timber Hill Group Managing Partner Cary Goldman, who founded the Chicago-based firm in 2018. The first truck parking facility he bought was near southwest suburban Stickney and Chicago’s Midway Airport, and tenants typically were paying about $135 per month for each space.

“But spaces in the same area now go for between $275 and $300,” Goldman said. “And spaces near Chicago’s O’Hare Airport can cost $375 and are trending toward $400. What other sector has seen its rental rates more than double in just a few years? Although that will certainly help bring in more investors, it’s a management-intensive business, and actually operating industrial service facilities will probably stay with specialists.”

Unlike the new distribution warehouses so popular with investors, ISFs sometimes have hundreds of tenants, each needing just one or a few truck spaces.

“It really is akin to self-storage,”  Goldman said. “And setting rental rates isn’t easy, as no one tracks the information needed to generate comps. There is no CoStar for truck parking places, The information is not easy to obtain and it takes a lot of real ground-level research. It’s also not a trophy asset,” he added. “It doesn’t look pretty on a brochure. It’s a lot of gravel behind a fence.”

Timber Hill Group now owns 16 assets, according to Goldman, and like IOV, plans to keep buying. It formed a joint venture in September with Chicago-based Champion Realty Advisors, and over the next 12 to 18 months the venture plans to acquire $150M of assets in infill locations near road interchanges and rail networks.

He said he expects that the market for ISFs will soon get even tighter in most metro areas. Not only is it tough to get the proper zoning and other approvals from cities for new truck parks and storage areas, but ISF owners can frequently score deals to transform existing spaces.

“Supply is actually coming off the market, because it’s being converted to other uses, an added bonus for ISF owners, Goldman said. “It provides good cash flow while you wait for great development opportunities.”

 

Source: Bisnow

 

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As industrial took off in 2020, so did new construction in Florida markets. In many of those areas, completions have reached historic levels.

In the second half of 2020, large-scale speculative construction projects or expansions at existing industrial parks were announced in multiple Florida markets, according to Cushman and Wakefield’s “Florida Industrial Construction” report.

There was 15.4 million square feet (MSF) under construction at the end of 2020. In addition, another 29.7 MSF is poised to come online in the next three years.

Out of this new construction, speculative building dominated. At the end of 2020, 5.8 MSF of speculative building had been completed. C&W says Build-to-Suits accounted for 43% of all completions. Many of those speculative projects under construction have yet to attract tenants. By the end of 2020, only 56% achieved any pre-leasing.

“In several cases, developers moved ahead with entitlements hoping to land a sizeable build-to-suit for a new-to-market or expanding tenant,” according to C&W.

Drilling down into individual markets, Miami leads the way with 8.7 million square feet of industrial space proposed. Tampa Bay (6.0 million), Lakeland (5.8 million), Jacksonville (3.7 million), Broward (2.4 million), Orlando (2.0 million) and Palm Beach (1.2 million) are next.

Tampa Bay leads with 3.4 million square feet of industrial space under construction. It is followed by Miami (2.7 million), Broward (2.2 million), Orlando (2.2 million), Jacksonville (1.9 million), Lakeland (1.7 million) and Palm Beach (1.4 million). The highest preleasing was found in Lakeland (91%), Jacksonville (84%), Orlando (60%) and Miami (50%).

In a recent report focusing on Jacksonville, Colliers International found that construction, which represents about 1.9% of the current industrial stock, created a “trickle-up” effect where industrial users are shedding dated space for quality new construction product. The trend has produced a combination of rising industrial vacancy—which hit 5.4% in the fourth quarter—and rising rents—which increased to $5.21 per square foot.

While other asset classes are closely monitoring the vacancy rate—typically because a rising rate leads to tempered if not negative rent growth—Colliers says that increased vacancy is actually a welcome relief in the Jacksonville industrial market. In 2018, the local vacancy rate reached lows of 2%, giving users limited options. Today, the increased rate of 5.4% still points to healthy market conditions, and new construction activity is well matched to demand.

Nationally, industrial space is getting absorbed. In a recent report, Moody’s Analytics said the warehouse/distribution space absorbed 35.4 million square feet in Q4, its highest mark since Q1 2019 when 70.7 million square feet were absorbed.

Construction for the new warehouse/distribution space fell to 25.8 million square feet in Q4 after hitting 38.2 million square feet added in Q3, according to Moody’s Analytics. The space has posted an average of 36.8 million square feet of new inventory added per quarter in the prior six quarters.

 

Source: GlobeSt.