Instant Gratification: Millennials' Expectations Drive Demand For Industrial Warehouse Real Estate
Wake up and want Raisin Bran? Order it before you crawl out of bed and it will be there before you finish your first cup of joe, thanks to Seattle's growing number of fulfillment centers. With the push to get orders to customers faster than ever, there is no shortage of demand for industrial buildings, but finding land and labor here in the Pacific Northwest is another story.
The consumer expectation is to order a product and have it delivered within hours, not days. To do that, companies need warehouses close to consumers that are filled with items most likely to be ordered that day.
“And it’s not just the millennials,” he said. “My 94-year-old mother-in-law asks me why something is taking so long.”
O’Keefe shared these thoughts at Bisnow’s recent Pacific Northwest Industrial event held at the new Embassy Suites by Hilton Seattle Downtown Pioneer Square.
The closer the products are to the population, the faster they can get to the consumer. Well-stocked smaller warehouse spaces are becoming more desirable since companies are getting good at stocking high-demand products.
“The data is getting so good that companies can anticipate what we will buy before we buy it,” Bridge Development Partners’ Justin Carlucci said. That creates a demand for smaller distribution centers that are closer to the consumer.
The market for these smaller spaces is so hot that even hearsay has brokers blowing up phones.
Carlucci said a rumor that Bridge Development had been selected to purchase a 50K SF warehouse space triggered calls from three brokers in 24 hours.
“The site wasn’t even tied up at the time,” he said.
Terreno Realty Corp.’s Matthew Bean said the close-in smaller warehouse market is on fire.
“If we buy the best location close to the consumer, we will find demand for it,” he said.
To accommodate changing distribution needs, companies are requiring different warehouse specifications. For example, companies are thinking ahead about the future of automated picking systems and asking for taller and wider truck bays.
“If you aren’t in front of this, it may cost you,” Stewart Title’s Scott Miller
While Seattle has some vertical warehouses, it is not a major trend.
“In Brooklyn, where land is 325 bucks for a foot of land, a three- to four-story distribution center makes sense,” Carlucci said.
Seattle land prices have not hit that level, but land in the city is scarce.
“The land-grab is so great,” she said.
While South King County was once the warehouse hot spot, land there is now scarce. Panattoni Development’s Bart Brynestad said in today's market, even places like Frederickson are considered appealing.
“There’s no land,” he said. “And the land that is out there is too expensive.”
The industry’s other major obstacle is labor. Not only is it difficult to find labor to build the warehouse sites, companies need to have good workforce accommodations once the warehouse is up and running.
“Everyone is struggling to keep and acquire talent,” Centerpoint’s Bob Andrews said. “The companies are requesting excellent climate control and big lunchrooms.”
Another problem is that the labor force can’t afford to live close to the warehouses, and commuting to the locations is a problem, Warshak said.
Both panels agreed that the industrial market is hot and changing, and there are no signs of it slowing down anytime soon.