The significant growth of e-commerce continues to have significant effect on the industrial market. Increased sales translate into greater demand for logistics facilities tailored to the needs of e-commerce. Online sellers have become the fastest-growing segment of warehouse occupiers. In November, the increase in employment in transportation and warehousing exceeded growth in retail, which points to the strength of internet shopping.
CHANGE IN THE INDUSTRIAL LANDSCAPE
The warehouse and distribution centers have now evolved into retail/industrial hybrids. Technological advances in fulfillment are affecting the demand for warehouse space, influencing not only building size requirements, but also the location and build-out of the facilities. The need to keep larger stocks of inventory and to package and send out items in-house has generated the need for bigger fulfillment centers.
BIGGER AND BETTER
Developments in logistics and technology have driven the demand for newer and bigger warehouse and distribution centers. While the million-plus square-foot distribution centers make up a small fraction of the total new construction, overall building size is becoming increasingly larger. An increase in construction is already underway as developers see fundamentals improving and the market for big-box space tightening. Currently, 14 warehouse/distribution buildings over 1 million sf are under construction.
Due to the size of these new centers, large investors will be most able to take advantage of the strong demand for this property type. This trend is already underway as huge asset managers like Blackstone and Brookfield and REITs like Prologis and Liberty Property Trust have been major players. Two $1.0 billion+ portfolios recently closed including Liberty’s acquisition of a large industrial portfolio from Cabot and Brookfield’s purchase of the U.S. industrial properties of Japan’s Kajima Corp.