As COVID-19 shapes our “new normal,” it presents both challenges and opportunities for tenants and landlords in commercial real estate. As we navigate this redefined landscape along with you, we’re sharing insight on the outlook for manufacturing space, office space, shopping centers and other commercial properties. By understanding the forces at work and at play, keeping an open mind, and focusing efforts on growth sectors, commercial real estate can continue to thrive. This series of articles explores issues for tenants and landlords in the three asset classes – industrial, office and retail – that Flaum Management Company Inc. brokers.
Here’s some hopeful news: Warehouse and manufacturing space may receive a boost from COVID-19. As online commerce intensifies, the sprint to keep pace with consumer expectation and demand – plenty of options in stock, available for same-day or next-day delivery — has heightened the pressure on stores. These stores then turn to their vendors, insisting they have enough space to stock merchandise. The spike in online shopping has also revealed the extend of our country’s dependence on foreign manufacturing for critical infrastructure.
Within the business sector, we sense a growing unease with relying on essential product from foreign countries. Logistical details, tariff issues, and the feeling that every American is “in this together” have all fueled a movement for manufacturing to return to domestic shores. Through this unexpected window of opportunity, the expansion of warehouse and manufacturing space to accommodate demand has rich potential. Not only can it reverse the decline of domestic manufacturing, it may even usher in its resurgence.
(I don’t think we want to highlight a competitor) Market reports forecast increased outsourcing and growth for distribution, warehousing and fulfillment services before COVID-19 peaked. This prediction has come to fruition, with space now at a premium. The expansion of warehouse, distribution and fulfillment workforce’s for Amazon, Target and Walmart parallels a broadening of industrial space across the board.
From multi-story warehouses equipped with loading docks to the emergence of “micro-warehouses” under 120,000 square feet, industrial assets can serve as both prized distribution space and key fulfillment centers. Micro-warehouses allow companies to establish fulfillment centers in more population-dense areas, paving the way for faster delivery and supporting an enhanced customer experience. And manufacturing spaces with forward-thinking design are poised to benefit from the emerging trend of automation, in which robots collect, sort, and package products to expedite delivery. Enhancing the quick turnaround that consumers expect, automation and other AI such as data analysis of purchases will allow companies to perform at top efficiency throughout their physical space. Warehouse space will begin to transcend its role as “just storage” to become critical to business strategy.
Bottom line: businesses that expand their industrial footprint will play a critical role in strengthening infrastructure, meeting demand while driving innovation.
By R. Scott Burdett