Why Obsolete Warehouses on the ‘Last Mile’ Are Attracting Institutional Investors
Institutional investors are now competing for small, previously obsolete class-B, -C and -D industrial buildings in urban locations.
By Patricia Kirk
Every $1 billion in e-commerce sales requires 1.25 million sq. ft. of distribution space, said Scott Marshall, executive managing director of advisory and transaction services | investor leasing with CBRE, during a meeting of the Chicago chapter of NAIOP earlier this year. He noted that with e-commerce sales poised to grow by more than 10 percent year-over-year, to $491 billion in 2017, e-commerce companies will require an additional 50 to 60 million sq. ft. of warehouse distribution space this year alone.
The distribution space along the “last mile” to consumer makes up a big chunk of this need, according to Marshall. This has created a new niche for institutional investors who are now competing for small, previously obsolete class-B, -C and -D industrial buildings in urban locations and are snapping up whole portfolios in this asset class.
Among this group of investors is Canada-based Ivanhoe Cambridge, the real estate subsidiary of the Caisse de dépôt et placement du Québec, one of Canada's leading institutional fund managers. The company recently announced the acquisition of a 16-million-sq.-ft. property portfolio from Boston-based Evergreen Industrial Properties. This portfolio consists of more than 150 light industrial facilities in strategic infill locations in high-growth U.S. markets, including Seattle, Denver and Charlotte, N.C., as well as major distribution markets Atlanta, Chicago and Dallas.
U.S. investment specialist DRA Advisors also recently acquired a portfolio of 184 small- and mid-sized warehouse, distribution and light industrial properties in infill markets across the nation from Cabot Properties for $1.6 billion.
According to research firm CoStar, investors covet class-B urban i