E-commerce has changed the way industrial properties are being built. Warehouses and industrial facilities are now bigger, taller, built with more dock-high doors and built in high demand. Over ten years ago, 250,000- to 500,000-square-foot buildings were impressive. Those are babies compared to the one-million-square-foot-plus buildings built today. Logistic companies have changed the way they operate: business is all about trying to get a product to the warehouse, docked, sorted and sent to the client as fast as possible.
Logistics and industrial companies are also buying up smaller spaces near big cities to be closer to their client base. Being within a certain radius of big populations drives better business — the closer you are to your clients, the better the services you can provide.
However, companies are now combatting a lack of available smaller spaces and looking for ways to skip the process of products going through third parties and getting them to consumers faster. Consumers don’t necessarily care about how they get their products or how they are packaged, but they are impressed with how fast they get it. Getting stuff to the consumer is vital. Our world is one where consumers expect bigger, faster, sooner, and the market will adjust as this trend persists — and as long as it is profitable.
The number one piece of advice to companies seeking to purchase industrial space is to look at whether each space has enough square footage. A 10,000-square-foot difference isn’t going to heavily affect your business, but a 50,000-square-foot difference will. Find the minimum square footage that you really need to function and look at the maximum square footage that you can afford. It never hurts to buy extra space if you can afford it. Companies can lease the dead space or expand how they use it. Some companies will rent space out for containers and make huge profits. Or, unused space often becomes storage. Second, consider site accessibility and proximity to major corridors and freeways.
The long-term benefits of companies buying industrial spaces outside major cities will eventually lead to the perfection of logistics and e-commerce. Companies will get their products to the customer quicker and with more cost efficiency and settle big losses to third parties and other companies. While a lot of money is going into buying space, not everyone is going to win. As companies get down to the science of these distribution methods, many may find their margins way off and go out business. There will be corrections in the market and an increase in vacancies. Some companies will downsize. What we do know is that distribution operations are only going to get faster and more efficient moving forward. If companies don’t adapt they will be phased out of the market.
Rene Ramos, Jr. is named the Coldwell Banker Commercial brand’s top producing industrial broker globally in 2016 and 2017. He has become an integral part of the organization and its industrial services group. Prior to joining Coldwell Banker Commercial, Ramos served as a decorated combat veteran and received an honorable discharge with high honors from the U.S. Army. CBC Advisors operates as a full-service commercial real estate brokerage, representing world-class industrial, investment, multifamily, office and retail properties nationwide. The firm’s Asset Services division manages a portfolio of commercial properties in excess of 24 million square feet.