The Parking Lot, Endangered At The Office, Thrives At Industrial Properties
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Office buildings across the nation are paring back their parking lots as more of their employees turn to public transit or ride-sharing services. But in the world of industrial real estate, the opposite trend is taking hold. Thanks to e-commerce, parking lots are growing.
“Our clients have been increasingly asking for less building coverage and more parking,” said P.J. Charlton, senior vice president of investments at CenterPoint Properties, which has developed and acquired more than 61M SF of industrial real estate. “Ten years ago, all industrial developers cared about was building as large a structure as they could on their land. Today, it’s all about parking.”
Behind the growing need for parking lots is the rise of e-commerce. As consumer demands for next-day and same-day shipping rise, warehouses need to hire more staff, keep more products in stock and have a large fleet of vans ready to deliver packages at a moment’s notice. All of this means these buildings need more parking than ever before.
In Joliet, Illinois, CenterPoint recently developed a distribution center on a 69-acre site. When a large national retailer asked for a 750K SF facility, it also requested a dedicated parking area that was over 1M SF to accommodate transloading from international containers to domestic 53-foot trailers. These requests — where bulk industrial buildings are being complemented by large adjacent parking areas — are becoming more frequent, Charlton said.
“Clients keep coming to us and saying ‘I need to be near the major population centers and the ports, but I also need extra land for parking,’” said Brian McKiernan, senior vice president of development at CenterPoint Properties. “Developers and property owners are realizing that if they don’t build a significant amount of parking into their spec, industrial tenants could move on to the next site.”
Industrial tenants use parking lots for more than just vehicles. Parking lots are flexible space where tenants can drop containers, park 53-foot trailers for storage or last-mile delivery vans, or use the extra land for additional auto parks.
The demand for parking is also at the heart of CenterPoint’s acquisition strategy. The company is currently renovating a 1.1 million SF SoCal Logistics Center that they are marketing for lease. The project features 597 car parking spots, 180 dock positions and an additional 265 trailer parking positions, which Charlton explained is very hard to find in the infill L.A. industrial market, especially in close proximity to the ports. He added that one thing that really attracted CenterPoint to the property is that the site offers tenants the flexibility to convert car parking into trailer parking or trailer parking into car parking as needed.
“We’ve found that buildings that come with extra land that can be used for parking are drawing premium rents,” Charlton said. “Tenant demand for parking is so high that if you find a property with extra acreage, you can significantly boost your profits and get your space leased up more quickly.”
Providing potential tenants with all this parking can be a challenge, Charlton said, especially for buildings that were developed between the 1960s and the 1980s, when coverage ratios were usually skewed in favor of buildings. Developers could consider tearing down sections of the existing buildings to make room for additional parking, but Charlton said this can be a costly and complicated endeavor.
As land becomes more scarce, it is becoming more difficult to find undeveloped industrial sites large enough to accommodate a warehouse and several acres of parking. However, Charlton said that CenterPoint has a long track record of success in developing, acquiring and managing these types of large assets.
“CenterPoint is one of the leaders when it comes to developing and investing in parking-rich assets,” Charlton said. “We believe in the potential of these properties to not only offer higher revenue potential but also higher downside protection if the economy changes.”
This feature was produced in collaboration between Bisnow Branded Content and CenterPoint Properties. Bisnow news staff was not involved in the production of this content.