Flexibility is Key to Staying Relevant in Today’s Industrial Market, Say InterFace Panelists

ATLANTA — The industrial sector is busy riding the e-commerce wave, pushing demand for warehouse space to new heights. But land scarcity and changing investor preferences are forcing developers to get creative with their projects, making flexibility a top priority in today’s market.

“The industry is changing so quickly, and Amazon is driving that,” said David Welch, president of Robinson Weeks Partners, an industrial real estate development and investment firm based in Atlanta. “We’ve had to be as flexible as possible because the large users aren’t waiting for build-to-suits — they want it now.”

Welch’s comments were made during the industrial development panel at the first annual Intersection of Industrial and Retail in the Southeast conference, held Thursday, Aug. 23 at the Westin Buckhead in Atlanta. Sponsored by InterFace Conference Group and Southeast Real Estate Business, the half-day event drew more than 170 industrial and retail professionals from across the region.

Joining Welch on the panel were Todd Carter, partner at Exeter Property Group; Mike Demperio, partner and vice president of CRG; Brian Cardoza, senior vice president of Rooker; John Barker, president and chief operating officer of Red Rock Developments; and Alfredo Gutierrez, president of SparrowHawk, who moderated the panel.

Developers Look Beyond Last-Mile

Although infill and last-mile locations are still desirable if the deal can pencil out, the lack of available land and the need for larger facilities are pushing developers to look at markets on the outskirts of major population centers.

“The general sentiment is we’re going further out to find the land because you have to be flexible,” said Cardoza of Rooker. “You’ve got to be able to provide trailer parking, car parking and the room to expand.”

In July, discount retailer Five Below announced it would invest $70 million to build a new distribution center in Monroe County, roughly 60 miles southeast of Atlanta — a stretch outside the “last-mile” perimeter.

In addition, the desire for bigger, “future-proofed” facilities means that even if developers can find the land to develop within the last-mile, it must meet the size requirements desired by investors.

The pushing of clear heights and larger facilities has been a trend for a few years now, and that is going to continue, according to Demperio of CRG.

“The key component here is the larger facilities,” he said. “The beginning is just here. We’re not in the ninth inning, we’re in the top of the first.”

But it’s not the tenants that are demanding these features — in many cases, it is investors looking for a safe, long-term investment.

“It’s not so much the users demanding it more so than it’s the investors feeling comfortable if they’re buying with a longer-term perspective,” said Carter of Exeter Property Group.

Redevelopment Presents Opportunities

In order to make deals financially feasible, industrial developers are looking beyond sites typically zoned for industrial product.

“It’s a repurposing of location,” said Carter of Exeter. “We’re continuing to see those product types that once were ignored or discounted actually becoming very important to completing the supply chain for companies.”

CRG, the St. Louis-based real estate development arm of Clayco Inc., recently acquired a $60 million office building in Seattle, tore it down and built a warehouse on the site.

“In Seattle, the numbers work,” said CRG’s Demperio.

Robinson Weeks is the master developer behind Gillem Logistics Center, a 1,168-acre, master-planned logistics center that will eventually be able to accommodate more than 8 million square feet of e-commerce and distribution facilities. The site in Forest Park, Ga., is the former Fort Gillem Army Base.

“The site had about 5 million square feet of 1940s-era Army buildings, and we spent a lot of time looking at the cost of retrofitting and repurposing those,” said Welch. “The cost to rehab those just didn’t pencil out, but to spend the money to demolish them and put up brand new stuff is making all the sense in the world.”

Cardoza said Rooker has also looked outside the traditional realm to find developable sites, citing the company’s redevelopment of Shannon Mall in Union City, Ga. The development company acquired the site in 2014, seeing it not as dead retail space, but as an opportunity to acquire a large tract of land.

“We took a little bit of a risk on that project, but it’s now a 1 million-square-foot warehouse that Keurig occupies delivering K Cup pods,” he said. “Before the roof was even on, we had a lease.”

The site is also home to Atlanta Metro Studios, a movie studio. Incorporating uses besides industrial into these parks is becoming a more prevalent trend nationwide, setting the sector up well for the future.

In Houston, Hines is completing design for Grand National Business Park, a 1.5 million-square-foot mixed-use project that will include a logistics center, hotel and retail space. In Aurora, Colo., United Properties is developing Tower Business Center, which will include 450,000 square feet of industrial space as well as a 7-Eleven and Ronny’s Car Wash. The Denver-based development company is also underway on Enterprise Business Center, which features a little more than three acres of retail in front of a large flex/industrial development.

“Because of the evolution it’s going through and the purpose it serves now, industrial will continue to be a sought-after product type,” said Carter.

— Camren Skelton

Content Partners
‣ Bohler
‣ Lee & Associates
‣ Lument
‣ NAI Global
‣ Walker & Dunlop

Subscribe to the newsletter

Webinars on Demand

Read the Digital Editions

Northeast Multifamily & Affordable Housing Business

Midwest Multifamily & Affordable Housing Business

Western Multifamily & Affordable Housing Business

Texas Multifamily & Affordable Housing Business

Southeast Multifamily & Affordable Housing Business

Heartland Real Estate Business

Northeast Real Estate Business

Southeast Real Estate Business

Texas Real Estate Business

Western Real Estate Business

Shopping Center Business

California Centers

Student Housing Business

Seniors Housing Business

Featured Properties