Real Estate Journal — Industrial / Distribution Centers — May 24 - June 13, 2019 — 7A
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M id A tlantic
I ndustrial R eal E state & D istribution C enters By Eric Kuhn, Pillar Real Estate Advisors Mid size cold storage and “Last Mile” needs create high demand for facilities
tribution ma- chine contin- ues onward with “same day” delivery and an ever- increasing ar- senal of offer- ings featuring p e r i s h a b l e W
ith its sights set on world domination, the Amazonian dis-
to take a higher priority in the strategic planning of producers and distributors of perishable products. It is no longer enough to produce and have available a high-quality product. That same level of product must now be readily and continuously available in the both the local grocery store and for delivery to a consumer’s door in very short order. To that end, the need for secondary, “Last Mile” facilities is increasing at rates never seen. These locations are smaller footprint facilities than the that of the primary production and distribution lo- cations, which provide staging
for the strategic logistic needs of storage and distribution to a denser regional market. In con- trast to the larger production facilities being traditionally located in more rural settings, these smaller facilities need to be positioned closer to the pop- ulation they serve. This pres- ents as a challenge from a real estate perspective as available sites with the qualifications of conformant zoning, proximity to major thoroughfares, and in- frastructure can be rare. Often it is the repurposing of a former facility that allows for this ad- dition to a company’s strategic growth initiative. Company’s
looking to utilize flex and industrial buildings, which have NOT been previously used as cold storage and dis- tribution facilities, often face the challenge of reinventing the building’s infrastructure, which can take many months and cost hundreds of dollar psf; in contrast to available “in place” facilities, offering significant speed-to-market at fraction of new construction or full retrofit pricing. Look for this trend toward food production, storage and distribution companies need- ing mid-size facilities to in- crease, with delivery taking
the priority in consumers’ minds, and producers look to compete in an ever increasing “need it now” market. Interest in this product sector extends beyond the confines of US com- panies looking for strategic enhancements to their infra- structure. Increased demand by European companies look- ing to gain a foothold in the USmarket for their perishable product lines have many of these sites getting attention abroad as well. Eric Kuhn is managing partner of Pillar Real Estate Advisors in West Chester, PA.
Eric Kuhn
product lines which will have climbed to a larger percentage of overall sales in the time it takes to read this paragraph. This is just one of the Jenga pieces which sets the stage for a true uptick in demand for cold storage and distribution facilities. Reports from both the Dairy and Meat production sectors show a surplus of product. The 2018 reports from the USDA and US department of Agriculture are showing 2.5 BILLION pounds of meat and 1.39 BILLION pounds of cheese in storage. Even by Philadelphia standards, that’s a lot of cheesesteak on standby. Adding to this surplus are the recent tariffs placed on Meat and Dairy exports. Primary sources of this reduction in foreign consumer demand stem fromChina andMexico as their imposed tariffs make US products all but cost prohibi- tive. Some offset to this reduc- tion in foreign demand may result from the recent outbreak of a “swine flu” contamination of pork in China, mandating the loss of millions of animals and creating a shortfall for a country which has been tra- ditionally a large consumer of pork product. With consumer expectations being altered as to what is pos- sible from the service and deliv- ery industry, logistics continue continued from page 6A at our iPhones, impulsively purchasing and expecting those goods to be delivered to our doorstep within 24 hours, these trends in the industrial world will only continue to become more prevalent. With so few new product deliveries being absorbed as quickly as they can come online, expect pricing to remain strong. Jordan Metz is senior vice president of Bussel Realty Corp. in Central NJ. By Jordan Metz, Bussel Realty
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