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Senate Construction Update 11/17/20

Recap: M3 Coalition Discusses Changing Face of Industrial from Warehouse to High Tech Hub

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For many outside the CRE industry, the term warehouse conjures visions of convoys of 18 wheelers docked at a sprawling 1M+ square foot facility. In many cases, however, this is no longer the norm with advances in technology making today’s last-mile distribution centers high tech hubs. Earlier this week The Middlesex 3 Coalition hosted a webinar to discuss the changing face of the industrial/warehouse sector. The coalition, a public/private partnership aimed at spurring economic development along the Route 3 Corridor, brought together a group of industry leaders to take an in-depth look at what is arguably the CRE industry’s hottest submarket and why towns should consider working to attract this type of development.

The webinar was moderated by Demetrius Spaneas, President of Land & Sea Real Estate, a boutique real estate firm based in Andover. Spaneas was joined by Steve Horan, a leasing associate at Farley White, Rob Rose, Director of Client Planning at Senate Construction, and Bob Buckley, Senior Partner at Riemer & Braunstein. The panel brought together a wide range of experience from the developer/investor point of view, through design/build and lease-up. As Spaneas pointed out at the start of the event, investors previously focusing on office or other sectors are now looking into industrial development. Taking a quick look at post-covid transactions across the state this certainly holds true as a large portion of these have been in the industrial/warehouse sector with significant gains seen on many of the sales.

The growth in this sector can of course be traced to the major change in consumer behavior. While many people were already shopping online prior to COVID the outbreak only accelerated the shift to e-commerce. One stat Horan had pulled from a recent Deloitte study shows that over 65% of consumers expect free 2 day delivery of items bought online. These are very different expectations from 5 years ago and with this change in consumer expectations came advancements in how products were delivered. Buckley, who works with developers across the state on permitting these types of projects, pointed out that these distribution hubs are now high tech centers, utilizing various technological advances to increase the speed and volume of delivery. Rose, of Senate Construction, a design-build firm with 30 years of experience across the state of MA has also seen client specifications changing to accommodate technology. On a recent project, Senate installed a super flat concrete slab to allow for a higher racking system that increased storage for the end-user while allowing for the use of automated systems. 

Across the Middlesex Route 3 region and throughout the state users are looking for locations near densely populated areas with access to highways. For existing assets, 30-32 feet of clearance is needed with large open bays and room for high racking throughout. However, there is not a large portion of land or available space meeting these requirements so many developers have gotten creative. Take the former Blue Cross space in Southie that could be transformed into an Amazon distribution center or the former Necco Factory in Revere that recently opened as an Amazon facility. As the panel pointed out however these conversions only work if the numbers make sense. Developers can also benefit from a design-build firm like Senate helping with site selection when land is available. Familiarity with town zoning is key in many of these deals when time can be a large factor as a firm like Amazon is not likely to get involved in a deal that would require up to 2 years just for permitting. Working with a pre-engineered building, like that Senate has extensive expertise in as a certified Butler builder can also save time when a quick turnaround is needed.

As the face of retail changes and e-commerce adjusts to meet the expectations of today’s consumer (think drones & autonomous vehicles) there will be more changes seen in the industrial/warehouse sector and it is also key for communities to understand the value of these new tech-heavy assets. As Horan pointed out along with the warehouse space, robotics, AI, and data analytics teams could utilize flex or office space nearby distribution hubs. Rose also reminds us, Massachusetts does have the skilled talent and infrastructure in place to support these developments and suggests towns could work to set up guidelines to help move things more quickly. With the limited availability of large parcels of land, the panel expects to see smaller distribution centers, heavy on technology, popping up across the region, and the “warehouse” asset class remaining a strong bet for investors.

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