The Changing Landscape in Long-Term Industrial Demand
NEWPORT BEACH, CA, August 9, 2023 – A new paradigm of tenants are contributing to long-term industrial demand from e-commerce, innovation and onshoring, creating exceptional demand, a higher quality of tenant base, and value-creation opportunities, according to a report from BKM Capital Partners.
The report, The New Paradigm: Tenants Driving Industrial Demand points to a significant change to tenancy within the light industrial asset class as three categories emerge: e-commerce, manufacturing, and technology. Collectively, these tenants accounted for roughly a 50% boost in overall light industrial demand.
According to the report, onshoring of large manufacturing plants is providing opportunities for smaller operators to supply goods and support services, while promoting innovation in the local community. This term, called the “halo effect,” takes shape in the form of increased demand for space, which can translate to higher rental rates. These factors can be amplified by other external factors such as infrastructure improvements and economic development initiatives like the 2022 CHIPs Acts.
This new demand, coupled with a constrained supply chain, place the light industrial asset class in a strong position for growth through 2023. The report outlines some of the factors contributing to this strong momentum in E-Commerce, and include:
Changing Warehousing Expectations: E-Commerce users utilize three times more warehouse space than traditional retailers – occupying smaller warehouses in well-positioned markets.
Location Optimization: The ability to move products quickly with the shortest delivery times to the consumer is critical to the modern supply chain – increasing the value of lower clear-height product in infill locations.
Last Mile Advantage: Urban hubs in the e-commerce supply chain shorten last mile distribution, saving not only on delivery cost but also helping meet sustainability goals by potentially saving up to 50% of greenhouse gas emissions. Well-located and highly functional light industrial warehouses or properties reduce transportation costs and meet customer demand.
New Supply Chain Creations: An efficient supply chain relies on vendor support from light industrial tenants.