Alex Cohen, chief executive officer of Liberty SBF, reviews current trends in demand for warehouse and industrial space, and how owners are acquiring financing in difficult times.
Demand for warehouse and industrial space remains robust across the country, with continued rent growth and higher prices per square foot, says Cohen. The capacity crunch has been driven by the fallout from COVID-19, as well as a general rise in e-commerce activity over the past few years and resulting supply chain congestion.
The situation is especially acute near major port areas, such as Southern California’s Inland Empire region, which supports the ports of Los Angeles and Long Beach. The same is true for parts of the country that are close to ports along the East Coast.
Cohen sees a shift in the dynamic between end-users of industrial properties and real-estate investors, with the latter beginning to eclipse the former in bidding for space.
A further trend in the market is the changing nature of the warehouse itself. In addition to the traditional regional distribution center, which might take up a million square feet or more, there’s growing demand for smaller facilities located closer to urban centers. That’s another result of the e-commerce boom, as retailers look to meet customer demands for rapid delivery of orders.
At the same time, says Cohen, many developers are reducing the portion of their properties devoted to office space and increasing that which is intended for warehousing and distribution use.
Opportunities also exist to convert retail properties into warehouse complexes in major metropolitan corridors, even to the extent of turning entire department stores or malls into distribution centers. But developers can run into re-zoning problems as they confront issues of traffic, congestion and noise close to residential neighborhoods.
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