Jodi Summers = Industrial Real Estate

E-COMMERCE IS LEADING THE INDUSTRIAL REAL ESTATE RECOVERY

July 20, 2012 on 12:50 am | In Bravo, Economy, New Developments, Trends, Uncategorized | 1 Comment

by Jodi Summers

Logistics and fulfillment continue to lead the current industrial revolution. E-Commerce companies are buying up big box distribution facilities larger than 500,000 square feet near major urban areas, which is why Inland Empire industrials have been thriving.(Finding ½ million square feet in Los Angeles County is challenging and extremely expensive.)

E-commerce superstars, such as Amazon.com, have spearheaded the demand. Recently, Amazon inked two deals to develop fulfillment centers in California. One massive complex is being built in the ultra-hot Inland Empire…San Bernardino to be exact. And, up north, a fulfillment center of approximately one-million-square-foot is being developed in Patterson (near Modesto).

Other big box buyers and lessees are dominated by consumer goods companies, distribution operations for major retailers, third-party logistics firms that support those industries and food and beverage businesses.

As you’ve been hearing, the Inland Empire exceeded all projections by capturing nearly 40% of all U.S. industrial absorption. That’s because the Ports of San Pedro and Long Beach make up the largest port complex in North America.

Other e-commerce firms have leased multiple facilities across multiple markets, taking advantage of double-digit growth and strength of e-tail online sales. Research by Jones Lang Lasalle notes that average vacancy rates in U.S. industrial markets have dipped below the 10% mark, and more than three quarters of the nation’s largest industrial real estate markets have recorded positive absorption.

Because of the renewed strength of the industrial market, we are seeing the return of speculative development. in the Inland Empire, as institutions are buying vacant warehouses, betting on future rent growth and leasing risk.

Expect to see continuing demand for quality big-box space in key logistics hubs, with the focus remaining on the Inland Empire, New Jersey (especially central), Chicago, and Dallas. Eexpect to see more activity in the emerging intermodal hubs, such as Kansas City and Memphis.