Tag Archive for: land scarcity

IOS Developments Drive Forward Despite Entitlement, Zoning Challenges

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With the trifecta of idling engines, diesel exhaust and the constant presence of 18-wheelers, industrial outdoor storage operators fight an uphill battle getting their projects approved by municipalities.

But rising demand — and the rising prices that come with it — has motivated developers to find ways forward despite community backlash.

Entitlement challenges, zoning difficulties and pushback from NIMBY-esque neighbors slow the production of IOS properties, causing developers to create strategies targeted at avoiding these pitfalls to get their deals done and meet a ballooning market need.

“The lack of available supply for truck terminals has historically been driven by local zoning ordinances,” said Cresa broker Eric Rose, who is based in Omaha, Nebraska. “Most communities aren’t friendly and won’t really add any more of these locations unless it’s via a case-by-case, special-use approval process, which is time-consuming and costly.”

As the continued growth of e-commerce and a renewed domestic manufacturing sector add pressure to expand trucking to handle increased logistics demand, some developers are striking out and figuring out how to add new capacity. With IOS vacancy rates slipping to 3% in 2022, according to Marcus & Millichap research, the need is clear. And with the high rents and sales prices being fetched by existing IOS properties, ground-up development can offer a significant payday, especially from interested institutional investors or truck carriers.

Earlier this month, Industrial Outdoor Ventures announced plans to turn the Twin Lakes Travel Park in Davie, Florida, 24 miles north of Miami, into a 38-acre industrial service facility. Situated south of Interstate 595, between State Road 7 and Florida’s Turnpike, the ground-up development will include two buildings totaling 227K SF and outdoor storage yards that can hold 280 truck trailers.

“This is another great opportunity for IOV to meet market demand by developing the type of modern facilities that today’s end users require and in a location that has a scarcity of land available for this type of asset,” Industrial Outdoor Ventures Senior Vice President of Development and Acquisitions Eric Johnson said in a statement.

Turnbridge Equities also just picked up a 3.6-acre site in Rancho Dominguez, California, near Los Angeles, in a $25.5M buy.

“The deal, another 2.49-acre pickup in the South Bay, aligns perfectly with our strategic vision of expanding our Industrial Outdoor Storage strategy in port-adjacent, infill and high barrier-to-entry markets,” a Turnbridge executive said in a statement.

In nearby Perris, California, Alterra IOS spent $8.5M on a 7-acre towing yard in early May, with plans to renovate it and reintroduce it as an IOS property with easy access to the busy Inland Empire.

Chicago-based Dayton Street Partners has been busy with redevelopments and plans to create new trucking facilities, one of just a handful of ground-up IOS developments taking place. The firm just finished a 95-acre terminal with 500K SF of industrial space at 5800 Mesa Road in Houston, which is being leased to the carrier Maersk.

The firm also has a 47-acre, 1,000-trailer terminal set to open in Baytown, Texas, near Houston and less than 20 miles from two Gulf ports, set to open in June. The terminal includes a 24-foot-tall, 1,382-foot-long building meant for unloading and reloading truck cargo. In addition, Dayton Street acquired two truck maintenance facilities in Atlanta with plans to renovate and reopen.

“The difficulties of finding appropriate space and building new facilities — often renovating existing industrial or vehicle-focused real estate, such as mobile home parks or underutilized warehouse sites with vacant buildings and minimal need for rehabilitation — means it often isn’t worth it to seek out real estate on the fringes of a market,” Dayton Street principal Howard Wedren said. “Financing has been rocky lately so it is difficult to get access to capital compared to those with longstanding client relationships.”

It is key to find locations near big travel hubs and ports, spots already in high demand for industrial developers seeking storage space.

“We don’t go to the outskirts,” Wedren said. “We’re very much into the high-barrier-to-entry sites. That’s our model, and we don’t deviate.”

High barriers are common for IOS projects. In Long Beach, California, the firm Cargomatic received city council approval for an IOS storage site last month near the busy Pacific port, just overcoming significant backlash by business groups and local leaders concerned about additional pollution from heavy trucks.

“There are no guarantees at the end of the day,” Cresa’s Rose said. “So do you go through a multiyear development process, not 100% certain that you’re going to get those rezoning and entitlements you need? Or do you just bite the bullet and buy the existing facility, and you can activate your service immediately upon opening the facility?”

In the case of Industrial Outdoor Ventures’ project in Davie, Director of Construction and Properties Rob Chase said the firm had good relationships with local leaders. It helped that the older travel park was showing signs of age and wear, and many in town were happy to replace the site with something newer.

Even with the support, it is a long process. Properly and fairly relocating existing residents is time-consuming, and even with the relatively simple construction requirements of these kinds of projects, it will still take 14 months of site work and construction once the site is cleared.

On the flip side, an empty site in Jurupa Valley, California, near the Inland Empire, that Industrial Outdoor Ventures acquired on the precipice of gaining approvals for construction in a portfolio purchase, now has to restart the entitlement process.

Chase said he sees the value of existing and new IOS facilities continuing to rise, spurring more developers to attempt more conversions, but he acknowledged that the process is often difficult.

“Having the right zoning is absolutely critical,” Chase said. “An entitlement process I describe as being long and drawn out is nothing in comparison to trying to change the zoning. That’s even more of a hill to climb. You could easily flip these properties, but pushing, sticking with it through to the finish line, is worth it.”

 

Source: Bisnow

Industrial Revolution Continues: ‘Ongoing Boom’ Draws Out Latest Crop Of Newcomers

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It’s rare for a property type to extend a growth cycle beyond a decade. But industrial real estate’s dominance only seems to grow — attracting newcomers while big players scrap for the materials and land they need to keep their projects moving and potential clients happy.

While longtime powerhouses like Prologis and Panattoni plow forward with their own mammoth projects — and Amazon admits that it has too much industrial space on its hands — other companies are making their debut, hoping to seize on some of the continued demand and expanding yields.

Although the industrial market has been on an expansion trajectory for years, there seems to be plenty of room for newcomers.

“It’s no secret why industrial is doing so well, with the e-commerce boom really accelerated by what’s happened in the last couple of years with the pandemic,” said Scannell Properties Director of Development in Southern California Jay Tanjuan. “People were almost forced to order online, and many realized how convenient it was. E-commerce has huge demand, and so there’s the need for warehouse.”

There seems to be widespread consensus that the industrial heyday is far from over.

“We’re in an ongoing industrial real estate boom. We had been in an above-average growth phase pre-pandemic and obviously, the pandemic accelerated that. Post-pandemic, it continues to grow,” said RBC Capital Markets Director Michael Carroll, an analyst who covers Prologis and other REITs. “I don’t think we’re at the end of it, it’s still ongoing.”

Carroll pointed to the nationwide vacancy rate for industrial space — 3.3% in the first quarter, according to Cushman & Wakefield, with lease rates up 15.2% on average compared to a year ago — and a rapid pace of leasing that means new spec development is snapped up as soon as it’s finished, if not before.

Among the industrial newcomers is Peterson Cos., the Virginia-based developer of residential communities, huge retail districts and data centers. Peterson took the plunge into industrial development last year, and has two projects totaling 334 acres underway in the Washington, D.C., area, with another 915 acres in the planning stages, according to Peterson President of Development Taylor Chess.

“We started looking at industrial eight to 10 years ago, seeing that as the wave of the future,” Chess told Bisnow. “We felt as though distribution was going to become a much more integral part of the retail market. But we kept getting beaten out by people buying land for data centers, so we pivoted to data centers.”

Now, as the company’s initial prediction proved out, hastened along by the pandemic, Peterson doubled down on its efforts, launching an industrial arm in earnest to capitalize on the staggering demand.

 

“There’s no question that internet sales and distribution were going to become a key industry eight years ago, and that’s why we started teeing it up. We had no idea it was going to accelerate as fast as it did,” Chess said.

Peterson’s not alone. Nationwide companies that have operated successfully for decades in other property types are also diversifying their efforts by turning to industrial.

South Carolina-based Greystar, for example, is a bastion of multifamily development and management, with thousands of units in major markets across the country. But Greystar in March paid $43.7M for 154 acres near the Phoenix airport, setting up the company’s first large-scale industrial project. Greystar got a leg up on its foray into a new product type by purchasing a parcel with plans that were already approved by the local planning authority. Greystar will work with a development team assembled by the former owner of the land, a Phoenix-based company called Unbound Development, according to a press release announcing the deal.

Similarly, private equity giant KKR & Co. earlier this month announced a dramatic push into industrial development, with plans to build 1.8M SF worth of mid-sized warehouses in last-mile distribution locations in Atlanta, Dallas, Denver, and Orlando, Florida.

And Tishman Speyer, known for its office buildings, hired Andy Burke, formerly of industrial developer Terreno Realty Corp., as its managing director to oversee industrial acquisitions and development. Tishman Speyer in December 2021 announced that it acquired two middle-mile distribution centers in Colorado and Pennsylvania.

Each of these new entrants to the industrial market appears to have a focus on last-mile distribution, which is basically the white whale of industrial development right now, according to Carroll, thanks to its demand paired with a lack of available land.

“Companies are trying to build industrial warehouses close to consumers because it reduces shipping costs and labor costs,” Carroll said. “It’s important to be as close to consumers as you can, but most cities don’t want industrial warehouses because they want the highest value for their tax base and the least traffic. It’s hard to build industrial warehouses where they actually need to be.”

The lack of available land is something about which Chess at Peterson knows a lot.

“This has never been an industrial market, it’s always been a government market,” Chess said of his company’s target market around the nation’s capital. “Zoning is a challenge, as well as finding large tracts of land. Many other areas have large industrial sections of their metro area that have already been designated or are being redeveloped from manufacturing. D.C. doesn’t have that, so finding the right location has been a challenge.”

Land availability is just one of the challenges for any company trying to develop industrial properties right now. Shipping delays and turbulence in markets and foreign countries continue driving up the cost of materials, and labor is difficult to find in most markets. This doesn’t just make buildings cost more, it impacts a key factor for potential industrial tenants: speed to market.

“The biggest issue with leasing is that when tenants enter the market, they want it now. That is the biggest issue. The tenants are there, but we have to finish building to be able to put them in. That’s why going spec is so important,” Chess said.

With so much competition for land, materials and labor, the addition of new players to the marketplace could be considered a negative for existing companies that are already battling to get what they need.  But Tanjuan says that for those who are committed to the product type, there’s a way forward.

“There are opportunities out there for everybody,” Tanjuan said. “It’s competitive, and finding space is extremely difficult, but there are opportunities out there. If you’re out there and being proactive, you’re going to run into something.”

 

Source: Bisnow

Labor Shortages, Land Availability Will Pressure Industrial In 2022

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Labor scarcity will be among the major headwinds driving industrial commercial real estate decisions in 2022 as record shortages challenge distribution channels and unemployment hits a near-historic low.

“With industrial related hiring already at all-time highs, the continued need for labor to service growing e-commerce demands, combined with an economy at nearly full employment, is exacerbating the labor shortage for distribution workers in many markets,” a new Colliers report notes, adding that the US unemployment rate is now near a 50 year low of 3.5%.

And while so far, the industrial sector has managed to post record growth, the labor shortages span “nearly all demographic groups and affect the entire American economy,” and continuing lows will slow the rate of economic growth and slow manufacturing output, Colliers predicts.

“While automation and advanced technologies are becoming more prevalent and affecting industrial employment, the future will still rely on highly skilled labor to operate complex systems and machinery, alongside robotics—labor that is increasingly more difficult to find,” the Colliers report notes.

In addition, scarce land availability will continue to impact the sector. Prologis reports that construction starts have risen to an all time high of 120 million square feet in the sector, but the firm notes that new supply is mainly concentrated in low-barrier secondary and tertiary markets and the outlying submarkets of inland markets.

While a record level of new supply is expected by the end of 2022—including massive build-to-suit projects for e-commerce suppliers and big-box chains—land near big population centers is increasingly scarce.

“Companies seem willing to pay a premium price for land with fierce competition for developable sites,” Colliers analysts note. “This competition is also driving up industrial rents, especially for logistics space near US seaports.”

Colliers also notes that facilities in excess of 2 million square feet are increasingly popular in dense markets as retailers attempt to establish footholds closer to consumers and shorten delivery times. The firm is tracking 12 such big-box multi-story industrial mega centers currently under construction, and notes that a vast majority are for Amazon.

 

Source: GlobeSt.

Why Redevelopment Could Be The Future Of Wellington

With ‘almost nothing’ left to develop in Wellington, developers could set their sights on existing properties — and already are.

Take a look at the most recent applications for development in Wellington and you might notice a trend. Instead of eyeing open property for development, builders are pitching new uses for already-occupied land. It’s a redevelopment trend that residents can expect to see more of as the village largely is built-out, officials say.

Redevelopment is not a new concept for Wellington. In the Wellington Country Plaza on the corner of Forest Hill Boulevard and Wellington Trace, a former Blockbuster was transformed into a Starbucks and BurgerFi. Up the road at the corner of Wellington Trace and Greenview Shores Boulevard, a former Kentucky Fried Chicken drive-through restaurant was repurposed into a Taco Bell. And at the corner of State Road 7 and Forest Hill Boulevard, a small retail outparcel was torn down to make way for a Chase bank.

“Residents should get used to seeing properties transform,” Planning, Zoning and Building Director Bob Basehart said. “The available undeveloped land in the village is down to almost nothing.”

One of the largest undeveloped sites in Wellington is the K-Park property on the southwest corner of Stribling Way and State Road 7. The village-owned piece of land has been the subject of development speculation in the past, but right now is part of a land-bank effort with no plans in the foreseeable future, officials have said.

“Another 65 acres of open land is just north of Wellington Regional Medical Center. But plans are in the works to create a mixed-use hub there with residential, retail, assisted-living and more,” Basehart said.

So where can residents expect to see more redevelopment? Basehart pointed to four key areas.

The Mall at Wellington Green

While the mall has not submitted any formal applications, a recent Palm Beach Post public records request revealed the mall’s owner, Starwood Realty, is considering redeveloping the former Nordstrom anchor space and part of the surrounding parking lot. The project could include residential, retail, restaurants and outdoor recreation space, the records show.

Defunct Golf Courses

Neighbors in 2017 fought potential redevelopment on golf courses at Polo West and Palm Beach Polo and Country Club. The golf courses’ owners, a pair of companies controlled by developer Glenn Straub, had applied to change the uses allowed on the properties. The changes could have paved the way for development, opponents argued. Since then, several concepts have pitched for each club’s golf courses, including residential neighborhoods, equestrian properties and in one case a tennis ranch. None have made it past the concept phase.

Older Commercial Properties

Residents already can see redevelopment efforts on older commercial properties in Wellington. While not seeing a change in use, the McDonald’s at Greenview Shores and Wellington Trace is getting a significant facelift, including a lobby renovation and small expansion and a second drive-through order lane.

Along the State Road 7 corridor, the owner of the former Romano’s Macaroni Grill in front of Whole Foods has proposed tearing down the building to construct something larger that would house two smaller restaurants and a retail store.

Older Residential Properties

With more multifamily homes in Wellington passing the 40-year-old mark, Basehart said residents should expect to see some redevelopment happen here as well. In some places, property owners already have built larger or more modern homes after tearing down aging structures.

 

Source: Palm Beach Post

Prolific Industrial Builder Bridge Development Plans New Facility In Davie

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Prolific industrial builder Bridge Development Partners LLC purchased 34 vacant acres for $36.9 million to build a three-building center in Davie.

Bridge Point 595 will be southwest of Interstate 595 and Florida’s Turnpike. The 677,314-square-foot industrial park is set to open in the third quarter 2020. Two buildings will measure 290,295 square feet each and the third will be 96,724 square feet.

Chicago-based Bridge Development bought the land from Forman Industrial Land LLC, an affiliate of the Forman family whose late patriarch Hamilton Forman was a prominent South Florida landowner who ventured into real estate projects.

Bridge Point 595 speaks to the healthy South Florida industrial market, which has some of the lowest vacancy rates among all asset classes. Population growth, e-commerce and the scarcity of large parcels are boosting the sector. That’s heightened interest from institutional investors, which have been scooping up properties and encouraged merchant builders who build to sell.

Bridge’s construction spree since 2012 added 2 million square feet in Miami-Dade and Broward counties. Bridge recently sold its 221,815-square-foot Bridge Point Riverbend west of Interstate 95 in Fort Lauderdale to institutional investor ASB Capital Management LLC for $38.2 million.

Its other projects include Bridge Point Commerce Center, a mammoth industrial project on 185 acres southwest of Florida’s Turnpike Extension and Northwest 47th Avenue in Miami Gardens. The 1.1 million-square-foot first phase will be finished by month’s end. Future phases will take the total size to 2.1 million square feet.

 

Source: DBR