While the 2016 shopping season may have looked weak for brick-and-mortar stores, statistics show that consumers are still spending and the trend is expected to climb in 2017. With the traditionals like Macy’s and Sears taking severe drops, the numbers point to a boom in online shopping, which was up 12.4% in 2016 as compared to the same three months in 2015. With certain brick-and-mortar retail becoming a more challenging investment, where are investors turning? A surge in industrial investment activity is answering part of that question.
Amazon Prime Effect
Currently, there is a growing inventory of large industrial warehouse space. It’s attractive to owners and investors as the consumer spending trend moves towards online ordering with quick deliveries. Larger spaces are needed to house more extensive inventory that’s locally available for quick delivery (the Amazon Prime effect!). A ripple effect of this is the transportation needs associated with the expanding inventory of large industrial warehouse facilities. With the exponential growth in shipping of online orders, the means to get the product to the consumer translates to more freight facilities space to keep up with customer demand. In some cases, more minor modifications can be implemented to enable existing warehouse facilities to accommodate an alternative transportation-related need. When looking to deploy capital in industrial warehouse properties, it’s important to take the right due diligence approach for this asset type.
The Right Due Diligence Approach – A Few Examples
The resurgence of transportation as it relates to the due diligence of industrial warehouse and freight logistics is a direct result of the shift to online shopping. With property locations often in areas with prior manufacturing, heavy industrial activity, or a transportation or logistics corridor – the need for diligent evaluation of historical impacts to the property is paramount in the Phase I process. Critical information on the environmental history that could rule out or limit a Phase II investigation is often available in the public domain, but it’s likely not all at your fingertips.
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