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Portfolio Sales of Smaller Industrial Properties Surging as Institutional Investors Jump On 'Las

Once Overlooked, Smaller Industrial Properties Finding New Value as Final Link in 'Need It Today' Supply Chains

By Randyl Drummer

Amazon opened this 203,000-square-foot sortation center in Swedesboro, NJ, in 2014.

In recent months, major investors have increasingly turned their focus on light industrial properties capable of serving as "last mile" conduits in the race to achieve same-day delivery by e-commerce firms.

Typically smaller, older and less efficient than their bulk warehouse counterparts, these buildings previously languished on the market. But thanks to recent outsized rent growth driven by strong demand from e-commerce and logistics providers, these formerly overlooked assets find themselves back in favor among investors in logistics hubs across the country.

Sales of large logistics portfolios dropped during much of 2016 as the market digested the multi-billion- dollar platforms purchased by Global Logistic Properties Ltd. (GLP), Prologis and others during a record setting 2015 for investment sales.

However, investors have returned to the market since last fall with a series of more modest portfolio transactions, capped by DRA Advisors' $1.04 billion purchase last week of 184 mid- and small-sized warehouse, distribution and light-industrial properties in in 21 states from Cabot Properties.

Marketmaker Blackstone also re-entered the logistics market in the third quarter of 2016, buying 101 properties totaling roughly 12.5 million square feet from Irvine, CA-based LBA Realty for $1.4 billion. Th smaller buildings, which average less than 125,000 square feet, are concentrated mostly in port and airport locations on the West Coast around Los Angeles, Oakland, San Francisco, San Diego and Seattle with other properties scattered in regional hubs near Dallas, Denver, Phoenix and Las Vegas.