We at Elion Partners are constantly considering trends in industrial real estate. Last month, Elion’s Managing Partner Shlomo Khoudari wrote about the increasing focus on logistics-based locations for businesses, due in large part to the growing impact of e-commerce on the supply chain. While this shift in consumer spending to e-commerce plays a key role, it is only one factor in the continually evolving landscape of industrial real estate trends.
According to PwC’s recently released 2019 Emerging Trends in Real Estate Study, consumers’ basic daily needs, cyclical spending, and structural trends are the three main factors driving demand for logistics space. E-commerce categorically fits within each of those drivers. Today, e-commerce fulfillment makes up about 20 percent of new leasing, with online sales generating three times the demand for warehouse and distribution space compared with in-store sales (Source: PwC’s Emerging Trends in Real Estate 2019 Survey.)
However, investors need to consider the other 80 percent of new leasing, and how location affects the decisions of those occupiers. Predictive analytics has shifted the mindset of consumers and businesses who are seeking best in class service. This is causing a huge increase in demand for logistics space, particularly in locations where investors can optimize costs and services. The right location means that logistics occupiers can operate at an increased level of efficiency in order to meet a higher standard of expectations from stakeholders at the consumption level of the supply chain.
Similarly, there is a new emphasis placed on the need for quality labor. Workers have demands for amenities in their workplace that facilities a need to comply with in order to attract best in class labor. These factors are driving the price up for logistics-optimized locations, particularly close to large urban cities where last mile can be costly. Elion’s RidgePort Logistics Center is a prime example of this. Located in the Greater Chicago area, RidgePort offers best-in-class wellness amenities for the local workforce and professional truckers, and provides heightened logistics solutions last mile supply chain need.
Outside of e-commerce, there is an overall structural shift in the industry that is placing a newly significant weight on evaluating and understanding the importance of location within supply chain real estate. As investors and operators, we have deep experience in the industrial space, sourcing and evaluating off-market opportunities in order to capitalize on the attractive market in effort of delivering superior value to our investors.