As the demand for urban ‘last mile’ logistics assets is increasing globally, many firms are buying Class B and C industrial properties because “everything is being leased,” according to Robert Fordi, chief executive officer at Annapolis-based logistics-focused real estate firm Realterm Logistics and managing partner for its transportation investment platforms.
However, he believes that not all assets marketed as ‘final mile’ will necessarily work well as delivery hubs and over time the assets that actually are efficient will prevail as tenants become more selective.
Transcript:
As the e-commerce juggernauts have grown throughout the world, they become much more important to distribution supply chains. It is the case in the US, North America, Europe and Asia; it’s a global phenomenon that’s increasing at varying degrees depending on how quickly those different markets are being accepting of e-commerce into the overall retail sales chain.
In the US context, approximately 14 percent of sales are e-commerce-generated retail sales, and we’re not really sure where that will end up. We know it will be 15 percent, we know it will be 20 percent, it will probably be 25 percent, perhaps more. But we know that the built environment for high-flow-through facilities can today only accommodate the 14 percent that it is. So the short, medium, and long term demand for these facilities is going to continue over time.
So when we look at packages that are marketed as last mile or final mile – which from an industrial perspective is what everything is marketed now – what we have come to appreciate when we look at these portfolios is that if it is a 50 building portfolio, there may only be one or two assets in there that are truly that. What you find is that Class B and C industrial is being marketed as final mile. It is infill, but infill does not mean an efficient delivery hub. You need to have the different factors that we look for to understand actually what the true utility of the building is; what sort of volume you could put through it for a delivery operation.
So our view is that many of the platforms that are investing in Class B and C industrial right now because this is a bit of a evolutionary time where everything is being leased, but we believe that over time people will become more selective about the facilities that are actually more efficient. Because efficiency and density are what is going to make the most efficient competitor in the marketplace.
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