Tag Archive for: cold storage facilities

Cold Storage And E-Commerce, But Not Amazon, Sustaining South Florida’s Industrial Boom

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For most of the last few years, Amazon has been the dominant force in South Florida’s industrial market, but the e-commerce giant’s recent pullback hasn’t had a negative impact on the region’s warehouse market, industry insiders said at Bisnow‘s South Florida Industrial Outlook event last week.

“The last few years it has all been Amazon, right? They were making 90% of that e-commerce growth. They were really bailing us out of all that space we could not lease,” Bridge Industrial Vice President Aaron Hirschl said at the event. “Now it’s everybody else playing catch-up. It is 85% of all the e-commerce deals are other groups other than Amazon. It’s really good to see that positive growth there.”

The vacancy rate for South Florida industrial properties dropped to 1.8% in the third quarter, according to JLL research. Rents have grown 60% year-over-year, to an all-time record of $14.35 per SF. Construction is speeding up as a result: So far in 2022, approximately 2.3M SF of new product has been delivered. Over the next 18 months, JLL projects deliveries to hit 7.8M SF.

“Much of that is still fueled by e-commerce, even in the absence of the industry’s leader,” Prologis Vice President Jason Tenenbaum said at the event, held at the GalleryOne Fort Lauderdale by Hilton. “I’d say e-commerce continues to be the predominant player, I am guessing in the majority of our portfolios, and that’s notable particularly because of Amazon’s specific slowdown this year,” he said. “I would say the vast majority of our work is centered around that space.”

Tenenbaum said that he expects more leasing in the e-commerce space to come from third-party logistics companies as retailers themselves look to outsource their distribution. Those companies, called 3PLs, have accounted for more than 35% of all warehouse leasing in South Florida so far this year, according to a just published CBRE report.

“I think as pricing and rents continue to rise and supply is constrained, you will see a lot more of all of our clients electing to 3PL their supply chain,” Tenenbaum said.

After e-commerce, the biggest driver of demand in the industrial market is in the food and beverage industry and their need for cold storage, developers at the event said. The global cold storage market was over $9.6B last year and is projected to reach $11.3B this year and hit $25.4B by 2027, according to an October market report by Reportlinker.

“If you look at where the demand is the most nationally, clearly cold storage will be it,” BBX Logistics Properties Mark Levy said. “In South Florida, if you look at the footprint of the market as a percentage of the total base, it’s a very, very small amount of cold storage space product that has been delivered.”

Tenenbaum said that the tourism industry in particular has been active in looking for cold storage properties, a piece of the market that had been largely absent for the previous two to three years.

“There was a time in the last 24 to 36 months where the tourism activity was way down. Now it’s back at a high pre-pandemic levels,” Tenenbaum said. “As tourism has come back and the cruise ships are set to sail again, that’s a really active space.”

Levy said that while the cold storage market is “still tremendously undersupplied,” building the space on a speculative basis is still a rarity. But Bridge Industrial launched a spec cold storage warehouse in Hialeah last year, and signed FreezePak to a 312K SF lease in March.

“I remember when Bridge was working on that development and we thought ‘Those guys are crazy! There is no way that they are going to get those rents,’” Hirschl said. “And sure enough, they leased it out and knocked it out of the park. They proved a thesis and it was really cool to see it happen.”

Kroger, the largest grocery chain in the country, doesn’t have a supermarket in South Florida, but it opened a 60K SF warehouse in Opa-Locka this year to start delivering groceries directly to customers’ homes. Kroger said in its September earnings report that its delivery sales grew by 34% from the previous year.

“Kroger does not have any grocery stores here but they are renting near people’s homes,” Hirschl said. “That trend is really interesting to see if they can really penetrate the market here.”

Butters Construction & Development Director of Acquisitions Adam Vaisman said on a panel that, in addition to e-commerce and food and beverage companies, manufacturing is an increasing presence in the market. He said his firm signed a 200K SF lease with a manufacturing firm in Broward County and was getting ready to break ground.

“You will definitely see more of the manufacturing jobs, especially given our labor pool here in South Florida,” Vaisman said. “We are definitely starting to see that and I think that trend is starting to pick up if you continue to have global instability the way we do.”

But while manufacturers and cold storage providers largely need specialized space, e-commerce users are taking any space they can get in a market with soaring rents and sub-2% vacancy.

“Location is the most important always, so for e-commerce users, if they can’t find a new building and it’s a market they need to be in, they will make it work with a Class-B space or a Class-C space,” said Seagis Property Group Vice President of Florida Acquisitions and Leasing Bradlee Lord. “Public transportation will only get increasingly worse as the population grows. With Covid in 2020, the roads were still relatively busy. Location matters as congestion gets worse.”

 

Source: Bisnow

 

Five Developers Seeking Industrial Projects In The Agricultural Reserve In Southwest Palm Beach County

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Five developers filed land use amendments for industrial development in the Agricultural Reserve in southwest Palm Beach County.

All five applications are in response to a county-initiated process to establish a Commerce Future Land Use category in the Agricultural Reserve to allow light industrial projects. The County Commission is set to vote on this in August.

The Agricultural Reserve is traditionally a rural and agricultural area. Most of the development allowed there has been for single-family homes, creating one of the fastest growing neighborhoods in South Florida. Residential developers must set aside land for preservation in the Agricultural Reserve, and industrial developers would be required to do the same.

Five sites in the Agricultural Reserve in Palm Beach County have been proposed for light industrial development.
(MAP CREDIT: JMORTAN PLANNING & LANDSCAPE ARCHITECTURE)

Amid huge demand for industrial space throughout Palm Beach County, all of the industrial land along Atlantic Avenue just east of State Road 7 has been approved for development and there’s a need for more development to serve the residents, said Lauren McClellan, senior project manager for Palm Beach Gardens-based JMortan Planning & Landscape Architecture, which represents all five land use applications.

“Now that most of that pre-existing industrial land has been entitled, it is apparent that the demand for various types of industrial space (including but not limited to office warehouse, landscape services, cold storage, and last mile distribution) continues to grow,” McClellan said. “If the Board of County Commissioners adopts the Commerce language in August these five applications will become requests for the Commerce Future Land Use designation.”

Gunster attorney Brian Seymour, who represents Fort Lauderdale-based BBX Capital Corp. in the largest application, said it was filed so the company could get a head start on the long process of a land use change amendment so it will already be in the works should the County Commission approve the Commerce designation. He noted that the light industrial category would not permit heavy industrial uses or self-storage facilities, but it would be appropriate for small-bay warehouses, last-mile distribution centers, and cold storage.

David A. Menchof, an associate professor of supply chain and operations management at Florida Atlantic University, authored a letter for BBX stating that building last-mile distribution centers in the Agricultural Reserve would reduce traffic because goods can reach residents there faster without having to be delivered from distribution centers further away.

Here’s a look at the five applications:

  • State Road 7 Business Plaza: BBX Capital has 40 acres at 9863 and 9773 Happy Hollow Road under contract from Suzanne, Diana, and James Mulvehill. The maximum potential would be 600,000 square feet of light industrial space or 315,000 square feet of flex space with office and light industrial.
  • Boynton Land Commerce: The 8471 Boynton Beach Land Trust, led by Peter Patel in Boca Raton, acquired 15 acres at 8421 S. State Road 7 for $8.53 million in 2021. The land use amendment would permit up to 294,030 square feet of light industrial.
  • BC Commerce Center: BC Boynton Industrial LLC, managed by Malcolm Butters of Coconut Creek-based Butters Construction & Development and Jon Channing in Palm Beach Gardens, has 9.3 acres at 8255 Boynton Beach Blvd. under contract from Paul B. Dye, Randall Thorne, Kimberly Tiernan, Martha Ely and Randy T. Ely. The land use amendment would permit up to 181,515 square feet of light industrial.
  • EJKJ Industrial: Fort Lauderdale-based EJKJ Development LLC, managed by Donald M. Allison and Edward Jackson, paid $3.36 million in April for 7.9 acres on the west side of State Road 7, across from Rio Grande Avenue and just south of Atlantic Avenue. The land use change would allow up to 155,444 square feet of light industrial.
  • Morin/Connolly Commerce: Howard C. Morin, the Robert Morin Trust, and Carol A. Connolly are the long-time owners of 3.4 acres at 9819 S. State Road 7, which currently has 4,040 square feet of warehouse and storage space, along with truck parking. The land use change would permit up to 66,843 square feet of light industrial.

The County Commission is also considering a county-initiated land use change to permit apartment projects there.

 

Source: SFBJ

 

Expert Roundup: Brokers Discuss Industrial Real Estate

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Since the pandemic started affecting the U.S. economy last March, industrial real estate has proven to be the bright point in an otherwise challenging real estate market.

As part of CommercialCafe‘s Expert Roundup series, a number of commercial real estate experts from across the country give their takes on why the industrial asset class is so resilient, what challenges it still faces, what the near- to mid-future has in store and even break it down to a regional perspective.

Industrial construction projects in the U.S. are projected to eclipse 342 million square feet in 2021 – the highest in five years. What are the main drivers of this expansion?

Grigoriy Azayev

“The main drivers of the accelerated expansion we see in industrial construction projects in the U.S. and abroad are the following:

Due to stay-at-home orders and lockdowns throughout the U.S.,people had no choice but to shop online for household products, clothing,equipment, and food. The e-commerce and last-mile delivery trend has beenemerging rapidly for the last five years, but the pandemic accelerated growth and demand to numbers and targets that no one in the industry expected to see until 2030 (ratio of online sales vs. in-person retail shopping and dollar amountsspent online in purchases).

But the writing was on the wall for quite sometime pre COVID 19..The retail experience has changed dramatically in the last 10 years, and year-over-year,less Americans go to physical brick and mortar stores for everyday consumer goods. Instead, they’re opting for online platforms which have been improving their ease of use, variety of products, and most importantly: delivery speed. It doesn’t pay to get in the car and drive 30 minutes to the store, walk around the store for an hour putting your goods in the cart, and then driving backhome, if for the same price, I can click a few buttons and have all my goods delivered – sometimes as quickly as 2 hours.” 

Steve Buss

“Right now, three major factors are driving industrial demand — the rise of e-commerce; manufacturing growth due to reshoring; and supply-chain diversification. All three were accelerated due to the pandemic..

E-commerce was a huge driver of industrial real estate expansion before the pandemic and — after a short pause initially in 2020 — it’s only expanded in cities of all sizes.

Industrial real estate demand is a natural reaction of the marketplace, which has doubled down on online sales — not just business to consumer, but also B to B. Corporations are expanding how much they’re willing to buy via e-commerce just like household consumers.

We’re living in a world where competitive delivery pressure is ratcheting up every day. Everyone needs to find warehouse space to help them deliver goods to their customers. They want to offer expedited delivery and develop last-mile e-commerce supply chains to compete against giants like Amazon.

Fulfillment and third-party logistics companies are increasingly in need of distribution centers within a short distance of urban and suburban areas. That’s not going to change. Demand is only going to grow, especially in secondary and tertiary markets. In-fill industrial — as well as new construction — will continue to grow in 2021.

Will Curtis

“The biggest things that has driven the growth in industrial is online shopping and the changes in the consumer purchase process. Between delivery driving the need to last-mile distribution to the click and pick up has increased the need for warehouse space for retailers.

The other thing that is adding to this trend is the move to suburban office space and looking at flex properties to combat COVID concerns like shared common areas, elevators or shared HVAC systems. Flex buildings have the ability to mitigate those issues and have driven the demand for more industrial demand.”

Fletcher Dilmore

“One of the main drivers of this expansion is that traditional big box retailers are conceding market share to online retailers, creating increased demand for industrial warehouse and fulfillment space from these growing online retailers who do not have a traditional physical presence.”

Michael Edwards

“Construction on industrial projects is booming, because we’ve seen consistently that despite periods of economic uncertainty or even crisis, industrial properties tend to remain stable. This means consistent cash flow and reliable investment growth. Industrial may not be the sexiest part of the real estate industry, but it might be the steadiest right now.

Additionally, sectors like e-commerce, data centers, and self-storage have recently seen higher-than-normal demand, and low supply. The onset of the COVID-19 pandemic accelerated the need for infrastructure to support these industries.”

Max Levinston

“Industrial was already growing at a fast pace before Covid, and this pandemic has accelerated many of these trends. In our market warehouse space either for sale or lease is quickly absorbed, both by investors and owner users.”

Bruce Lowry

“In our experience, the drivers in construction has two main drivers, (1) increased demand for warehouse space in general and (2) the lack of modern industrial and warehouse space. Increased demand for industrial warehouse space has significantly increased over the past several years as consumers have increasingly changed their purchasing habits from brick and mortar in person purchases to online orders with door step delivery. The global pandemic has increased this demand for door step delivery of online goods and services including perishable goods such as groceries.

Older consumers were forced to learn new technology and they are learning that they like the convenience of door step delivery. In turn, this increased demand for online ordering and door step delivery has increased the demand for both large warehouse projects and so called last mile warehouse space.

Secondly, outdated building infrastructure including lack of access to technological innovations such as communication and data infrastructure, buildings designed for automated sorting and delivery systems are increasing demand for newly constructed warehouse and manufacturing space. Buildings with narrow spans containing repetitive floor to ceiling support structures simply will not accommodate modern automated manufacturing and warehouse logistics systems and these buildings are being replaced with structures that contain these innovations.”

Bryan Shaffer

“E-commerce sales was growing before the pandemic, but the crisis accelerated this trend, with consumers unable to obtain goods from some retailers. Further, it was harder for manufacturers and sellers to get their goods to the market therefore many small suppliers have partnered with Amazon to keep their distribution line open. Overall, year over year industrial values increased 8.1% from February 2020 to February 2021, more than any commercial real estate asset class. The E-commerce sales resulted in much stronger demand for logistics and more demand for cold storage space.”

 

Industrial real estate has fared better that other asset classes in the last year. How has 2020 affected the industrial market this year and beyond?

Grigoriy Azayev

“The industrial market in 2020 has become the sweetheart ofCRE. Everyone is chasing industrial deals and some of the biggest players inother asset types are jumping ship to bid on industrial deals. Unfortunately,it is creating a supply shortage in the market throughout the country, and prices for both leases and investments are on the rise. I don’t see this trend slowingdown because companies like Amazon have publicly stated they want to doubletheir square footage in the next year and are paying top dollar for class A industrial space and land. Regrettably, it’s weeding out the little guys and small-to-mid-size businesses that also rely on supply chains and logistical real estate.”

Steve Buss

“Another huge factor driving demand for industrial real estate is a much greater awareness of supply chain risk, which was exposed due to the pandemic shutdowns. Shortages of all types of goods revealed just how tight supply chains were for many sectors. For example, some U.S. automakers weren’t able to operate because they couldn’t get onboard computer chips. That led to sustained automotive inventory shortages. Until the pandemic, that was an unseen or under-rated risk in the supply chain. Now, it’s impossible to ignore such risks. Businesses are diversifying those supply chains and rethinking how they manage risk, including where they want to store finished goods.

While it’s typically more profitable to run a really tight supply chain, businesses faced a rude awakening and discovered it’s also much riskier. Businesses and their customers found they were taking on far more risk than they realized by holding very little inventory. They weren’t ready to handle the supply chain disruption. Now, they’re asking how much more inventory they should have on hand to make it through the next supply disruption.”

Will Curtis

“Certainly of returns is always going to drive investments. With large players like Amazon, Walmart, and others that they need additional warehouse space has added to the investment-grade properties and brought in more demand.”

Fletcher Dilmore

“2020 has made industrial real estate an essential asset class. Distribution and warehousing went from being apart of everyday business to being the everyday business. Had it not been for the pandemic, I think it is safe to say we would not have seen as quick of an adaptation of online grocery shopping, something that had been available, but was a minuscule amount of overall grocery sales in previous years. ”

Michael Edwards

“2020 was quite a year – and it was fascinating to see the shifts in the real estate industry. In commercial real estate in general, most markets saw a decline in demand – but industrial saw a significant increase in growth and investment. We anticipate that investors will be eyeing industrial properties favorably in the months ahead.

Part of the reason for this growth in industrial investment is the consumer behaviors that accelerated e-commerce and data centers when the pandemic rocked our worlds last year. Grandparents who’d never ordered anything online before were suddenly getting groceries delivered and medications shipped and birthday gifts sent directly to their kids and grandkids from fulfilment centers. We expect this trend to continue, so demand will remain for the industrial properties needed to support those activities.”

Max Levinston

“Online shopping has been a huge reason for the increased demand. Many of these shifts in consumer shopping will not revert back once we’re further out of this pandemic..” 

Bruce Lowry

“The industrial and warehouse real estate market is strong and the demand for new industrial and warehouse properties across all sectors will continue as companies innovate and automate their manufacturing, logistics and delivery programs. We see only increases in this sector for the foreseeable future due to high consumer demand for e-commerce goods and the need to continue to automate manufacturing facilities.”

Bryan Shaffer

“The pandemic forced people to adapt to E-commerce. It likely pushed forward the market in the US by 5-10 years. People who were possibly thinking of looking at eCommerce were forced to utilize it during the pandemic to receive their needed supplies and services. In addition to industrial logistics demand, the vaccine also created more cold storage space. New technology has also developed quicker because of additional capital being invested in this space.”

 

Are there any other use-types besides e-commerce and cold storage that you see expanding more in the future?

Grigoriy Azayev

“We’re starting to see some secondary uses come into play,such as fleet parking for delivery providers and there has is a growing demand for movie studios and film production campuses in New York City. This is due to some excellent tax incentive programs for film production here and tremendous demand growth for instant and fresh content. There is also movement in the smaller “maker spaces” and manufacturers here in New York and other cities. The costs of shipping andoutsourced manufacturing on the rise, paired with long delays of production due to COVID-19, the cost of manufacturing in the U.S has become comparable to outsourcing due to a growing supply chain. It has become more and more seamless and cost-effective to manufacture all types of goods here in the states.”

Steve Buss

“Another issue that will drive industrial real estate in the years to come is reshoring or bringing manufacturing operations back to the U.S. Because of the pandemic supply chain issues, some companies are less convinced they want all their goods coming from one country like China if they can find local alternatives.”

Will Curtis

“In San Antonio, we are seeing a huge push for Cyber Security. Flex space is showing as a great cost-effective option compared to traditional office buildings. Cyber Security SCIF (Sensitive Compartmentalized Infrastrcture) is expensive to build out and flex gives a lower-cost option. Things like Port San Antonio has been a huge driver for the growth in San Antonio.”

Fletcher Dilmore

“I have seen an increase in demand in my local market for smaller flex space by tenants that have a specialized manufacturing or business specific needs.”

Michael Edwards

“Data centers, undoubtedly, will continue to grow in importance and their needs will evolve along with the technology that’s stored inside them. We’ve also seen self-storage grow over the past few years as a result of more people moving to smaller homes in urban settings. And, self-storage is a sector that tends to resist the overall trends during economic slowdowns – including this COVID-related one. More people than ever before are “working from wherever”, which means they can put their things in storage and hit the road.”

Max Levinston

“Self-storage and flex spaces.. Many investors are targeting the lucrative nature of self-storage, both industrial conversions and new construction. Flex space is also highly desirable for companies who need a few offices/conference room for staff which is connected to the warehouse.”

Bruce Lowry

“Self-storage and flex spaces.. Many investors are targeting the lucrative nature of self-storage, both industrial conversions and new construction. Flex space is also highly desirable for companies who need a few offices/conference room for staff which is connected to the warehouse.”

Bryan Shaffer

“Industrial overall is very affordable to build. Over time I expect to see an over-supply. This usually happens with real estate asset classes after they become over heated. I believe that e-commerce will drive more activity and offer a hybrid space between industrial and retail and logistics space will be incorporated into current retail properties. Walmart is an example of a brand where we are seeing this trend now.

The other likely impact on industrial will be the emergence of more food service, commercial kitchens, located within industrial properties, which will service the food delivery companies.”

 

What’s the #1 challenge industrial is facing in 2021?

Grigoriy Azayev

“The biggest issue that industrial real estate faces is beinga follower of the market rather than the leader. It’s great that Amazon candeliver my package to me in under 2 hours here in NYC from one of their manyfacilities, but if workers don’t return to the office and come back to living in the city, to who will they be delivering these packages? At the height ofthe pandemic, vacancy rates in NYC for residential buildings touched 25%, and to-date,offices are still at 15% occupancy. These huge investments into last-miledelivery will be a tremendous loss if the theme continues and people don’treturn back to NYC.

The second issue is more industrial real estate leads tomore air, water and noise pollution, and a substantial increase intraffic. In NYC, there is scarce industrial space and they depend on only a fewmajor roads that trucks can go on to reach the facilities. There are more andmore trucks and vans on the road, causing ridiculous traffic, and it’s alreadybecome an ongoing concern in the city.”

Steve Buss

“Industrial real estate is one of the few big winners of the pandemic. We see enormous investment potential in industrial properties due to the expansion of e-commerce and the growing demand for warehouse space. We’re expecting growth not just in big cities, but also in secondary markets, particularly in the Midwest.

For tenants looking for industrial properties to lease, it’s very competitive. It’s hard to find space. Due to high demand, industrial rents are going up. When tenants get ready to renew their leases, they’re getting sticker shock. They’re not used to that. That all means, of course, that industrial real estate is a particularly sound investment.

While many bigger box distribution centers are going up in the biggest markets, we see huge potential for developing or building smaller industrial properties closer to urban centers in secondary and even some tertiary markets. You can find 20-, 30- and 40-year-old buildings in excellent locations and make them very functional for multiple tenants. If you stay near urban centers, you can deliver last-mile supply chain accessibility, but also access to workers.”

Will Curtis

“Lack of inventory and pricing smaller users out of the market. I am working with a client now, who is more price-sensitive and we simply can not find space and the few things we do find are more expensive than what can be unwritten into the business plan.”

Fletcher Dilmore

“Keeping up with demand with functional product. Industrial has been the safe haven for real estate investors during COVID, but that doesn’t mean all industrial product is created equal or as equally valuable. There are many industrial buildings across the U.S. that are for practical purposes functionally obsolete. This can be because of low ceiling height, inadequate power supply, difficulty moving trucks in and out, lack of proper sprinkler systems, distance from major transportation arteries, etc.”

Michael Edwards

“We feel really optimistic that challenges will be few for industrial properties this year, at least relative to the opportunities in this part of commercial real estate. But it will be interesting to see how many people miss shopping in brick and mortar stores or having face-to-face interactions, cutting into the growth of e-commerce. We don’t expect that to happen, but it’s something industrial investors should be looking at.”

Max Levinston

“Supply, the availability is between 1 – 2% right now for quality industrial space, both for lease and for sale.

Developers cannot keep up with the demand which has also caused the prices of industrial land to go up as well. We’re seeing the prices/sq ft go up and some buildings getting leased before construction is completed.”

Bryan Shaffer

“Developers will race to add more industrial and flex inventory to the market because of the lower cost compared to other types of real estate and the current low vacancy rates. At the same time, overall changes in the retail market caused by e-commerce, will lead to more repurposing of existing better located retail properties into some type of hybrid distribution/ retail projects. Both factors together can lead to oversupply in some markets. Markets with higher land cost and more limited development opportunities will out preform markets with unlimited expansion potential. The long-term need is going to be for better located properties closer to shipping and population centers This will ensure that products can be delivered quicker. For 2021, I believe industrial will overall remain very strong, but the new growth in development may hurt the asset class in the future.”

 

Source: CommercialCafe

Cold Storage, Hot Assets: Online Food Shopping, Pharma And Vaccine Bring CRE’s Strongest Property Class To Forefront

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Long before the novel coronavirus pandemic sent Americans racing for their smartphones to order groceries, industrial real estate observers were keeping a close eye on the availability of temperature-controlled warehouses.

Covid-19 vaccines that require very specific temperatures — Moderna Inc.’s vaccine requires temperatures of minus-20 degrees Celsius and Pfizer Inc.’s candidate requires storage at minus-70 degrees Celsius — have put cold-storage warehouses in the spotlight in recent weeks.

But the sector has seen little vacancy for years, and industrial real estate experts don’t expect that to change as consumers shift more of their food shopping online, even after the pandemic is in the past.

Historically, the national vacancy rate of cold-storage warehouses has hovered below 10%, according to JLL, and much of that inventory is aging and rapidly approaching functional obsolescence. The average cold-storage warehouse in the U.S. is 42 years old, according to JLL.

“If we have a client who wants to know all the available temperature-controlled storage in the U.S. … on any given day, this isn’t something that takes up 10 pages,” said Tray Anderson, Cushman & Wakefield Inc.’s logistics and industrial lead for the Americas. “It’s more like two or three.”

The lack of available space is a function of economics: Temperature-controlled warehouses cost nearly twice as much to build as their dry-storage counterparts, according to JLL, which forecasts that those construction costs will only rise as demand intensifies. A temperature-controlled warehouse can cost $130 to $180 a square foot, whereas construction costs for a conventional warehouse range from $70to $90 a square foot.

“That pricing makes speculative construction — breaking ground without a signed tenant in place — difficult but not impossible,” said Anderson, who is based in North Carolina.

But the uptick in demand from food companies and retailers — coupled with the variable of a massive vaccine-distribution effort — is enough to embolden some developers to try their hand at speculative construction. Already, 95% of U.S. food goes through a third-party distribution center before it reaches consumers, according to CBRE Group Inc. And as early as May 2019, CBRE predicted that the country needed an additional 75 million to 100 million square feet of cold-storage space to meet demand for direct-to-consumer food orders — and that was before the pandemic threw online ordering of everything from furniture to food into overdrive.

“JLL is tracking more than 20 speculative cold-storage developments,” said Dustin Volz, a managing director on JLL’s capital markets team who specializes in such properties.

Cold-storage properties tend to be specific to individual users, but Anderson said projects could at least begin construction by pouring a floor that can handle a specific temperature.

“Speculative cold storage is still challenging, but a few select developers are figuring it out,” said Volz, who is based in Dallas.

Vaccines for the novel coronavirus aren’t expected to drive much additional supply for cold storage because the goal will be to administer the vaccines quickly. What that might do for short-term demand for space is another matter.

“The growth we’re talking about isn’t really vaccine-related; it’s food,” Anderson said. “Especially at minus-20 degrees … Minus 20 is much more common with pharma and food. You can find space that can do minus 20. You’re not going to find any vacant space at minus 80.”

Volz agreed that food is driving the majority of the demand — and that the pandemic highlighted weaknesses in the U.S. food supply chain, such as its reliance on international vendors and inability to handle sudden upticks in demand.

“The need for excess warehouse space is therefore a result of keeping additional inventory to handle any surges in food demand,” Volz said, “and maintaining a domestic supply chain with the unrestrained geographical access for the population with supplemental food imports to complement the new infrastructure.”

 

Source: SFBJ

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These 3 Real Estate Investments are in High Demand: Here’s How to Capitalize

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A key component of a successful real estate investment is choosing the right asset class to invest in within the given market.

Supply and demand is constantly changing, meaning what was a lucrative investment one, two, or 10 years ago may not be worthwhile today. See what types of real estate are in high demand right now and how investors can participate in the growing market.

Before we dive into where opportunity lies, note that just because there’s a general demand for these types of real estate doesn’t mean there’s opportunity for them in every market. Real estate is a very localized business that operates on a macro and micro level. For active investors, it’s important to identify what opportunities lie in your local market or participate in a more diversified investment portfolio specializing in these asset classes through a real estate investment trust (REIT).

1. Cold Storage

Cold storage is a type of industrial real estate responsible for the storage and transportation of cold goods, including food products. The global pandemic interrupted the food supply chain, making consumers and large grocery retailers adapt to the shift in consumer preferences for online grocery sales as well as the need for more cold storage as a whole.

This specialized niche has several barriers for entry, making it a difficult asset class to invest in outside of Americold Realty Trust (NYSE: COLD). Americold is the only industrial REIT specializing in cold storage, owning more than 1 billion cubic feet of cold storage space. The company is well positioned financially to grow with the increased demand.

2. Data Centers

We are undoubtedly in the age of technology, with more people and products becoming reliant on the efficiency, ease, and convenience of technology. Data centers are responsible for safely storing and computing data for the government, large corporations, cloud companies, and even data used from phones.

Demand for data centers has been on the rise over the past decade, but COVID-19-related work-from-home orders have put even more pressure on this growing sector. While demand as a whole is up, certain markets are leading the sector, including northern Virginia and Atlanta.

Data centers are another unique sector to invest in with large barriers for entry, making any of the top data center REITs a wonderful way to participate in this industry.

3. Residential Housing, With Emphasis On Affordable Housing

A study conducted by Freddie Mac found that the U.S. is short 2.5 million to 3.3 million housing units in 29 states, with states like Oregon, California, Texas, Minnesota, Florida, and Colorado the leaders in the housing shortage. These states, among others, are also home to some top-tier markets, where housing prices far outpace wages for the area, putting affordable housing in serious demand.

This means multifamily properties, single-family homes, and new construction can potentially be good investments in the right markets. This asset class is the easiest point of entry for investors, with dozens of options available to participate in actively, like fix-and-flip or rental properties, or passively through residential REITs.

However, it’s important to note that with current eviction moratoriums and a record number of tenants being unable to pay rent, the rental industry is facing tough times, making this a volatile market to participate in right now as a smaller investor. However, this industry is fairly resilient, and while it’s currently facing unique challenges, this market clearly has long-term demand and should bounce back in time.

 

Source: The Motley Fool

Monitoring Evolving Trends In South Florida Industrial Real Estate

As part of Colliers International South Florida’s annual Industrial Owners Forum, more than 50 institutional owners gathered in Miami.

They converged to take part in a closed discussion on the state of the industrial market in South Florida, where they own properties.

Steven Wasserman, executive vice president of the Colliers International’s South Florida industrial services team, hosted the forum. He sat down with GlobeSt.com to highlight the main takeaways from the discussion and the sentiment these influential leaders have about South Florida’s industrial market. In part two of this exclusive interview series, he spoke about evolving industrial market trends.

“There’s still a lot of excitement surrounding e-commerce and the impact it’s having on brick and mortar retailers,” Wasserman tells GlobeSt.com. “While many retailers are downsizing their retail stores, there is a growing demand for distribution space as consumers are buying their products online. Distribution centers near urban cores are in high demand.”

Wasserman pointed out another trend shaping the industry: construction costs. Construction costs have been on the rise, but he expects they will most likely remain flat in 2017 as the condo construction market slows down.

“Institutional owners expect the cost of labor and construction materials to start to level off after years of increasing costs,” Wasserman says. “New development construction costs are ranging from $70 to $100 per square foot for new class A warehouse space and will most likely remain at that price throughout the year.”

On the other hand, he says, cumbersome environmental and permitting issues continue to slow the construction process down. That is forcing tenants to holdover because space takes so much longer to build out in South Florida.

Another topic of discussion was the trend of parking requirements. Institutional owners discussed the significant increase in employee and trailer parking requirements for all sites nationwide, especially “last mile” sites.

“This used to be a requirement from larger tenants but they’re now seeing it from smaller tenants in the 80,000-square-foot range,” Wasserman says. “We’re also seeing growing demand for cold storage facilities. As population continues to increase and lifestyle patterns change, we’re seeing increasing demand for cold storage facilities. This particularly true in South Florida where suburbs are becoming urbanized.”

 

Source: GlobeSt.