Industrial Real Estate
The Rise and Growth of Industrial Real Estate
By: Natalie Tyler-Martin, Duke Realty As the world stayed home and people began to reconfigure their purchasing habits; change and pressure began to meet an already-evolving industrial real estate market. Over the past several years, industrial has seen growth physically, geographically, and operationally. The sudden increase in e-commerce and supply-chain needs has only accelerated the progress and demand in the sector.
From Then to Now Industrial buildings have not only changed in size and scale, but they have also changed in purpose. No longer are our buildings just being used for product storage and distribution, but now we house regional and national office functions hosting hundreds of employees and miles of conveyor systems. With a rise in grocery and convenience item delivery, industrial properties can also take on the distributor role to individuals participating in the gig-economy rather than a delivery service. E-Grocery is expected to grow from about 10 percent of grocery sales today to 25 percent by 2025, this expansion of services has meant the spaces themselves are forced to expand. When I first began in commercial real estate, industrial buildings were considered “large” at 300,000 square feet with 32-foot clear ceilings. Now, million square footers and 40 +-foot ceiling heights are now common. We have also seen the accelerated introduction of robotics and automated warehouses. While the use of technology continues to evolve, during a recent survey we found that 24 percent of customers over 100,000 square feet were using high automation within their operation. Many of our customers are still using traditional methods to pick and pack but finding efficiencies through coordination of supplier networks. As technology evolves, space uses will accommodate diverse needs for new automation and robotic requirements.
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Insight • Issue 3, 2021
One of the greatest differences over the last two decades is the demand on the supply chain network. The goal of our customers is to get to their product or services to their customers as fast as possible. To make that happen they either need to get closer to their customer or get closer to transportation nodes or ports to expedite the delivery process. This means more industrial properties need to be built, creative repurposing projects are needed and existing buildings have to be demoed, modified or expanded. Industrial vacancy rates are so low that customers have to make quick decisions to secure a space. Land availability close to dense populations is hard to find and the entitlement process is long and expensive.
Pressing Issues We saw at the beginning of the COVID-19 pandemic the necessity of a resilient supply chain. As the world reopens and organizations begin to rediscover their demand and operational needs, the existence of a resilient supply chain is even more paramount. The increased frequency of online orders and the expanding cohort of users contribute to the supply chain stressors. Pair that with a higher online return rate, it creates a system that demands flexibility and abundance. The idea of a resilient supply chain also affects the physical design and operation of a space as well. Expanding categories to fresh food requires a new demand for freezer-cooler facilities as well as supply chain bottlenecks forcing companies to move away from just-intime production to expand inventory capacities. Consumer shopping habits were already fueling industrial growth, but the pandemic was an accelerator for many organizations to expand their supply chain networks.
