Category: Industrial

How Will the Popularity of Online Grocery Deliveries Play Out for the Cold Storage Sector?

A surge in cold storage demand is expected to last. But exactly how it will play out is still an open question.

COVID-19 is impacting life in many unexpected ways, but it’s been a boon for U.S. online grocery sales.

“The interesting thing is COVID broke down the psychological barrier that had prevented many shoppers from buying groceries online, and in a post-COVID world this could transfer to cold storage demand,” notes Chicago-based Peter Kroner, research manager for industrial capital markets with real estate services firm JLL who recently helped his grandmother buy her groceries online for the first time.

With consumers now comfortable having groceries delivered direct to consumer (D2C) or buying online, pickup in store (BOPIS), disruption of the U.S. food industry is expected to stick. Kroner notes that three major U.S. retail grocery chains have already announced plans to launch free delivery of online sales by year-end. In addition, a Brick Meets Click/Shopper Kit survey found that 46 percent of shoppers plan to continue purchasing goods online, including groceries, post-COVID-19.

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Warehouse Giant Seeing Insatiable Demand from Amazon, Walmart

Prologis Inc. is seeing growing demand for warehouse space.

(Bloomberg)—Prologis Inc., the largest owner of warehouses in the U.S., is getting a boost as social-distancing pushes consumers deeper into the embrace of e-commerce.

Companies including Amazon.com Inc. and Walmart Inc. have an “almost insatiable” appetite for more warehouse space, Chief Executive Officer Hamid Moghadam said in an interview on Tuesday.

“We’re not seeing those guys slow down, they continue to be very active in making new deals,” Moghadam said. “The strong continue to be taking a lot of space.”

Prologis and Blackstone Group Inc. have gobbled up warehouses in recent years, betting in part that more and more shopping will move online. Still, e-commerce is a relatively a small piece of the warehouse business, which is more tightly tethered to the overall economy.

Even as the pandemic fuels job losses and batters the economy, the surge in online shopping, including for groceries, is keeping vacancy rates low at Prologis properties.

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Warehouse Giant Seeing Insatiable Demand from Amazon, Walmart

Prologis Inc. is seeing growing demand for warehouse space.

(Bloomberg)—Prologis Inc., the largest owner of warehouses in the U.S., is getting a boost as social-distancing pushes consumers deeper into the embrace of e-commerce.

Companies including Amazon.com Inc. and Walmart Inc. have an “almost insatiable” appetite for more warehouse space, Chief Executive Officer Hamid Moghadam said in an interview on Tuesday.

“We’re not seeing those guys slow down, they continue to be very active in making new deals,” Moghadam said. “The strong continue to be taking a lot of space.”

Prologis and Blackstone Group Inc. have gobbled up warehouses in recent years, betting in part that more and more shopping will move online. Still, e-commerce is a relatively a small piece of the warehouse business, which is more tightly tethered to the overall economy.

Even as the pandemic fuels job losses and batters the economy, the surge in online shopping, including for groceries, is keeping vacancy rates low at Prologis properties.

The company has grown rapidly through acquisitions, but Moghadam doesn’t see buying many opportunities amid the current turmoil.

“I don’t expect anywhere near the kind of opportunities that came in other cycles,” he said. “I don’t expect fire sales.”

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Is Marijuana Real Estate Pandemic-Proof?

A number of states deemed marijuana shops “essential” businesses and pot sales were up in recent weeks. Does that mean marijuana real estate is pandemic-proof?

While many bricks-and-mortar stores have temporarily shut down recently because they were deemed as “non-essential” in a time of a pandemic, the debate has not been settled when it comes to marijuana stores. For example, in California, Governor Gavin Newsom’s administration has designated marijuana businesses as “essential” because of pot’s health benefits, though that designation has come under criticism. Florida and Oklahoma have also designated marijuana stores as “essential.” Meanwhile, Massachusetts Governor Charlie Baker is facing pressure to allow the state’s marijuana businesses to re-open.

One thing that has been clear is that demand for marijuana has only shot up in recent weeks. A survey of 990 marijuana consumers conducted recently by online resource American Marijuana found that more than 48 percent stocked up on marijuana products amid the pandemic. Of those, more than half (55.39 percent) said they were stocking up specifically to calm themselves down. Another 23.03 percent said they feared pot might eventually become scarce.

Investors in marijuana real estate are trying to figure out how today’s altered landscape might impact their business.

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KKR’s Fast-Growing Warehouse Arm Lands $894 Million in New Debt

Alpha Industrial Properties secured a $690 million CMBS loan and a $204 facility from an affiliate of Invesco Ltd.

(Bloomberg)—KKR & Co. has refinanced its U.S. warehouse business, Alpha Industrial Properties, with $894 million in new debt.

KKR’s platform, which has made 40 acquisitions since May 2018, raised $690 million in commercial mortgage-backed securities in a transaction led by JPMorgan Chase & Co., according to Roger Morales, the firm’s head of commercial real estate acquisitions in the Americas. It also raised $204 million in a separate facility from an affiliate of Invesco Ltd.

“We have a lot of conviction in the sector’s drivers and expect to be significant investors in the asset class across a number of our real estate strategies,” Morales said in an interview.

Warehouses have become a hot asset as consumers increasingly embrace the convenience of e-commerce. Real estate-focused private equity funds have been vying with the largest real estate investment trusts for large portfolios of the properties.

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The U.S. Warehouse Sector Won’t Be Able to Escape the Impact from Coronavirus Outbreak

Phoenix reports highest year-over-year gains in December

U.S. home prices increased 3.8% in December from a year earlier, a faster pace than the prior month’s 3.5%, according to S&P CoreLogic Case-Shiller National Home Price Index.

Measuring the nation’s largest urban areas, the 20-City composite index rose 2.9% in December from a year ago, faster than November’s 2.5% pace, according to the report issued on Tuesday.

Craig Lazzara, managing director and global head of index investment strategy at S&P Dow Jones Indices, said the housing market continued its trend of stable growth in December.

“At the national level, home prices are 59% above the trough reached in February 2012, and 15% above their pre-financial crisis peak,” Lazzara said.

According to the index, Phoenix; Charlotte, North Carolina; and Tampa reported the highest year-over-year gains among all of the 20 cities.

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Highlights from Cushman & Wakefield’s North American Industrial Outlook

C&W expects the North American industrial market to remain one of the leading product types to watch.

Cushman & Wakefield recently published its 2020 North American Industrial Outlook report.

The brokarge firm forecasts North American industrial absorption in 2020-2021 will be a healthy 459.9 million sq. ft.

Industrial has arguably been the hottest commercial real estate sector in recent years. And signs point to that run continuing at least in the short term of the next two years.

Some highlights from C&W’s findings include:

  • Supply levels are projected to reach 573.4 million sq. ft. from 2020 to 2021. Nonetheless, vacancy will remain anchored around the 5 percent mark.
  • Asking rents are expected to increase by 6.8 percent and reach a new nominal high of $6.95 per sq. ft. by year-end 2021.

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Proximity to Rail Service to Play a Bigger Role in Industrial Site Selection

As rail service has become faster, industrial developers are increasingly considering rail access in site selection.

A growing truck driver shortage, along with improved efficiency of U.S. rail operations, has more shippers considering rail transportation as a viable alternative to long-haul trucking. As a result, some developers are placing new industrial development projects adjacent to rail access sites.

Industrial developers and investors are considering the advantages of rail access when choosing locations for new projects, says Tray Anderson, who heads the logistics and industrial services platform in the Americas for real estate services firm Cushman & Wakefield. While rail access doesn’t drive location decisions, it has become a risk mitigation strategy, offering an alternative to trucking if the driver shortage escalates.

Rail’s efficiency, safety, cost savings and superior delivery windows are widely recognized, says Reagan Shanley, executive vice president of industrial development at Denver-based The Broe Group and its affiliate OmniTRAX, a railroad developer/operator that connects businesses to class I railroads nationally. A 2018 American Trucking Association’s study found that moving products by rail was 45 percent less expensive per ton than shipping by trucks. The exceptions, according to Anderson, include non-competitive destinations only served by one rail line and seasonal shipments of agricultural products, when pricing escalates.

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Eight Predictions for the Industrial Sector in 2020

Industrial properties have been highly sought-after by investors for the past several years. Will that trend continue in 2020?

New project deliveries, continued cannabis legalization, a decline in manufacturing, faster e-commerce deliveries and the upcoming presidential election will all have an impact on the U.S. industrial sector in 2020, experts say. Here are eight predictions for the industrial sector in the new year:

1. The rush to cannabis production will likely accelerate in 2020, as more states legalize marijuana for recreational use, attracting investors to the higher returns cannabis-related real estate provides compared to more traditional property types, according to Chuck Taylor, director of operations for Englewood Construction, which collaborates with cannabis firms on cultivation and dispensary projects.
2. Demand for “last mile” warehouse space will continue to grow in 2020, as consumers demand same-day and next-day delivery and retailers intensify their delivery efforts to complete with e-commerce giants like Amazon and Walmart, says Nat Kunes, senior vice president of investment management at AppFolio, a property software firm. As a result, he expects to see conversion of traditional retail space to distribution facilities.

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Will the U.S. Industrial Sector Feel Any Impact from Phase I of the Trade Deal?

The first part of the trade deal with China is expected to be signed in a week, resolving some uncertainty around trade issues.

The Trump Administration is expected to sign a trade deal with China on January 15, a development that is expected to help farmers, electronics producers and financial services firms. However, 25 percent tariffs will remain on $370 billion in goods, including parts used in manufacturing and construction materials.

Although the administration has repeatedly claimed the tariffs are being paid by China, a New York Federal Reserve study confirmed what many tariff-opponents have argued from the start–that the tariffs are simply being passed through by importers and costing Americans an estimated $40 billion annually.

The new trade deal will eliminate a proposed 5 percent tariff hike on $250 billion in Chinese-made cell phones, laptops and toys; will scale back tariffs from 15 percent to 7.5 percent on $120 billion in other Chinese consumer goods; and will feature China’s agreement to buy an additional $200 billion in U.S. goods over the next two years.

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