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What effect is the medical marijuana industry having on CRE in Berks County?

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John Buccinno and Kyle McKechnie of NAI Keystone represented the seller, Pepsi Co., in the transaction of 1800 Centre Avenue, which is now home to one of the two Berks County applicants selected to grow medical marijuana in Pennsylvania.

Franklin Labs plans to use the former Pepsi distribution center at 1800 Centre Avenue as the location for their new growing facility. They must get their secure facility up and running in six months.

Reading City Council woman, Donna Reed, says “I’m happy the Pepsi building would have a repurposing so quickly.”

Since Governor Tom Wolf signed Senate Bill 3 into law, legalizing medical marijuana in PA, the race was on for companies to get their applications in for growing facilities and dispensaries.

With this planning came a high demand for larger industrial buildings in Berks County and its surrounding areas. A challenge in securing locations for medical marijuana sites in PA is zoning rules. These rules define what uses and conditions are permitted for the land. The challenge comes when a rule that may be permitted in one township may not be allowed on the next street that happens to fall in a different municipality.

The growing and processing of medical marijuana has its own challenges with rules and regulations as well. For example, most growing facilities will require a clean industrial or flex-type building. As an alternative, companies can choose to construct an on-site greenhouse on their land. This could take a toll on the effects the industry has on CRE if growers turn to this less expensive alternative. Whichever case, facilities must be fenced and will require high levels of security.

Since the medical marijuana epidemic began, rents for these growing and processing facilities have increased drastically. Many landlords have been requesting large security deposits as a result of the risk of the federal government impacting the state’s legalization and operation of these facilities.

Companies planning to open up dispensaries are looking for retail locations with a few main factors in mind: convenience, access, visibility and traffic. NAI Global PA firms such as NAI Keystone in the Berks County area, have experienced a dramatic increase in demand for commercial real estate from a number of national and statewide sellers. Pennsylvania firms must also work together to ensure equal coverage of dispensaries across the state.

Many companies have learned that buying their real estate may be the way to go given all the factors working against them in this controversial industry.

Sally Vader Veer, co-founder and CFO of Medicine Man said, “With so many obstacles and regulations in our way, owning your real estate is the only thing we can control in this industry. It’s essential to long-term success.” She also expressed that owning your real estate is a safe way to store your money, as long as property values hold or increase.

Josh Ginsberg, co-founder and CEO of Native Roots, said he has a team solely dedicated to looking for properties to buy or lease. They already own half their buildings and are working on purchasing even more.

As the commercial real estate industry adapts to this new industry, medical marijuana companies have also taken notice to the impact that CRE has had on their industry.

CalCann Holdings, a marijuana holding company, said that they are starting to focus more on the real estate instead of running dispensaries because these marijuana properties are worth millions if they are zoned properly.

George M. Stone, a real estate executive with the Witkoff Group, told the New York Times that, “This is a new segment of the industrial real estate market that is being created in front of our eyes.”

NAI Keystone sure has seen the effects of the medical marijuana industry on commercial real estate first hand. When applications opened, NAI Keystone received more than 75 phone calls from medical marijuana companies about properties. Before moving forward with any properties, our agents had to ensure that these companies have a strong financial backing seeing that this is a cash industry.

In the end, John and Kyle made out well on this deal by finding Franklin Labs a new home at 1800 Centre Avenue to begin their growing and processing facility. However, the future of medical marijuana commercial real estate needs are still uncertain due to the heavy regulations and risks that come with this evolving industry.



John Buccinno and Kyle McKechnie of NAI Keystone have facilitated the sale of 601R Fritztown Road

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John Buccinno and Kyle McKechnie of NAI Keystone have facilitated the sale of 601R

Fritztown Road, a 48,750 SF Industrial Building in Sinking Spring, PA. The property, sold

by East Coast Steel Fab, LLC will be occupied by Allied Well Drilling, a Maryland based

leading geothermal drilling company.

 

The property sits on 5.94 acres and is situated one mile south of Route 422 and three

miles west of Route 222.

 

NAI Keystone Commercial & Industrial, which maintains a prominent market share in

Berks and Schuylkill Counties, Pennsylvania, specializes exclusively in commercial and

industrial properties. In addition to property management and receiverships, NAI

Keystone provides brokerage services such as Tenant/Landlord and Buyer/Seller

representation, lease administration, commercial financing, consultation services, 1031

Tax Exchange, environmental surveys, and investment sales.

 

 

For more information, please contact

Kaitlyn Tothero

Marketing Director

NAI Keystone Commercial & Industrial, LLC

610.370.8533

ktothero@naikeystone.com


Welcome, Andrew!

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Andrew Klusman Announcement Card

Get to know our newest NAI Keystone family member, Andrew Klusman:

Q: Where are you from/how long have you been in the Berks County area?

A: I was born in East Falls, a section of Philadelphia and raised in Montgomery County, Willow Grove. I have lived in the Berks and Chester counties the last 5 years.

Q: What is your background in?

A: I have previously worked doing net asset properties site selection and leasing, at CPM/GreenPro as a property maintenance owner & operator and as an Inventory Manager for Wawa doing remodeling and new store openings.

Q: What are you most excited about learning while with NAI Keystone?

A: I am excited for the opportunity to learn more about property management and looking forward to working with national and local businesses in bringing fresh and innovative ideas to the community.

Q: What do you like to do in your free time?

A: In my free time, I enjoy doing outdoor activities like tennis, biking and hiking.

Q: If you could travel anywhere in the world where would it be and why?

A: I hope to visit all our National Parks.

Andrew will engage in all areas of brokerage in the Berks County market including leasing, sales, and advisory services. Additionally, Andrew will be helping with our Property Management Division.

Welcome, Andrew! We look forward to working with you and helping you grow your career in CRE!


You’re Invited!

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You’re invited! NAI Keystone’s Tammy Mitgang and John Buccinno are hosting an Open House at 556 N. Centre Street in Pottsville, PA on Wednesday, July 26th from 4-6pm. Come check out the former Maroons Sports Bar & Grill and see what’s new with this well-known spot in the Pottsville community.

The 3,450 +/- SF 2-story building is available For Sale or Lease. The building is ideally located and refurbished for an office, retail or commercial space. The property includes a separate deeded parking lot containing approximately 30 spaces and is located on a busy corner with high visibility.

We look forward to seeing you there!

556 N. Centre St. Open House Invite


John Buccinno and Kyle McKechnie represent Pepsico in the sale of 1800 Centre Ave.

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NAI Keystone’s John Buccinno and Kyle McKechnie represented Pepsico in the sale of the 46,800 SF Industrial/Manufacturing facility at 1800 Centre Ave. in Reading to Franklin Labs. Franklin Labs is one of the two companies to receive a medical marijuana growing license in Berks County.

In late June, the Health Department announced that 12 permits were issued to companies that applied to grow and process medical marijuana in Pennsylvania, including Franklin Labs who plans to start work on the building immediately. The company has several other medical marijuana growing facilities in several states including New Jersey and Colorado.

NAI Keystone Commercial & Industrial, which maintains a prominent market share in Berks and Schuylkill Counties, Pennsylvania, specializes exclusively in commercial and industrial properties. In addition to property management and receiverships, NAI Keystone provides brokerage services such as Tenant/Landlord and Buyer/Seller representation, lease administration, commercial financing, consultation services, 1031 Tax Exchange, environmental surveys, and investment sales.


Welcome our new agent, Andrew!

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Get to know our newest NAI Keystone family member, Andrew Prinzo:

Q: Where are you from/how long have you been in the Berks County area?

A: I moved to Berks County in 2000 when I was a child and still live in Exeter Township today.

Q: What is your background/interest in?

A: I received my bachelor’s degree from Duquesne University in Pittsburgh, PA where I majored in business management and minored in marketing. I am most interested in learning more about and working on office listings.

Q: What are you most excited about learning while with NAI Keystone?

A: I am most excited about learning the various factors that make each property unique.

Q: What do you like to do in your free time?

A: In my free time, I enjoy playing ice hockey or golf.

Q: If you could travel anywhere in the world where would it be and why?

A: I would travel to Australia. I had travelled there 12 years ago and I loved it. Ever since that trip I have always wanted to return and spend more time in Sydney, Melbourne and Brisbane.

Andrew will engage in all areas of brokerage in the Berks County market including leasing, sales, and advisory services. Andrew recently graduated from Duquesne University and is excited to start a career in CRE focusing on office listings.

Welcome, Andrew! We look forward to working with you and helping you grow your career in CRE!


850 N. Wyomissing Blvd. now for Lease

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3D Aerial - No TagNAI Keystone’s Bryan Cole is pleased to offer a prime single story office building for lease along N. Wyomissing Blvd.

The building located at 850 N. Wyomissing Blvd. is a 20,600 sf. Single Story building which has 9,050.00 SF available immediately, and another 3,950.00 SF that could possibly be added.

Call for additional details or for an opportunity to tour the building.

 

For more information, please contact

Bryan Cole, SIOR | Principal

NAI Keystone Commercial & Industrial, LLC

bcole@naikeystone.com

610.779.1400 (O)

 


Granite Point – Wyomissing PA

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Property of the Morning… 1 Granite Point in Wyomissing.

Two Suites for Lease (Can be combined)

  • Suite 1:  4,274 SF – Existing Medical Suite
  • Suite 2:  5,726 SF – Administrative Suite

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For More Information:  https://teamcole.box.com/v/1GranitePointe

For more information, please contact

Bryan Cole, SIOR | Principal

NAI Keystone Commercial & Industrial, LLC

bcole@naikeystone.com

610.779.1400 (O) | http://www.Bryan-Cole.com



Corporate Campus at Spring Ridge

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Property of the Morning… 1350 Broadcasting Road, Wyomissing PA

Only One Suite Remaining for Lease

  • Suite 1:  3,797 SF – Vanilla Box Condition
    • Suite can be built out for any type of use

1350 Brodcasting Road_Page_7

 

For More Information:  Property Info

For more information, please contact

Bryan Cole, SIOR | Principal

NAI Keystone Commercial & Industrial, LLC

bcole@naikeystone.com

610.779.1400 (O) | http://www.Bryan-Cole.com


Executive Park in Wyomissing

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Property of the Morning… 2001 State Hill Road, Wyomissing PA

  • Suite 105:  3,795 SF – 1st Floor Corner Suite (Can be Combined with Suite 120)
  • Suite 202:  5,580 SF – Corner Suite
  • Suite 120:  9,231 SF – Former Quest Lab Space (Can be Combined with Suite 107)

Eastern PA Office Portfolio - OM Part 1_Page_47_Image_0001

For More Information:  Property Info

For more information, please contact

Bryan Cole, SIOR | Principal

NAI Keystone Commercial & Industrial, LLC

bcole@naikeystone.com

610.779.1400 (O) | http://www.Bryan-Cole.com


4631 Penn Ave – Sinking Spring

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Property of the Morning… 4631 Penn Ave, Sinking Spring PA

  • Suite 102:  3,200 SF – End Cap former Medical Suite – Can be converted to any use
  • Suite 105:  1,500 SF – Corner Suite

For More Information:  Property Info

For more information, please contact

Bryan Cole, SIOR | Principal

NAI Keystone Commercial & Industrial, LLC

bcole@naikeystone.com

610.779.1400 (O) | http://www.Bryan-Cole.com


NAI Keystone’s Principal, Bryan Cole, SIOR, talks about the Medical Office Space in demand in Berks County!

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http://www.readingeagle.com/business-weekly/article/medical-office-space-in-demand-in-berks

A recent report by a national commercial real estate firm indicates an increased demand for medical office properties nationwide driven by an aging population, pressures to cut health care costs and new technologies.

And in Berks County, even though signs appear plentiful touting office space availability, overall vacancy conditions are deemed to reflect the national trend with certain qualifications, according to a principal at NAI Keystone Commercial and Industrial LLC, a major commercial real estate firm in Wyomissing.

CBRE Group Inc., a real estate services and investment firm based in Los Angeles, reported an overall 8 percent U.S. medical office building vacancy rate in early 2017 compared to a 13 percent vacancy rate for other market offices for the same period.

Leading the list of markets with lowest medical office vacancy rates were Nashville, Tenn., (2.8 percent), New York (3.2 percent), the San Francisco Bay Area (4.2 percent), Louisville (4.9 percent) and Kansas City (5.5 percent). The strongest medical job growth was pinpointed in Nashville.

“The steep increase in the 65 and over population and anticipated greater need for in-office physician services by this group signals a continued increase in demand for health care services and medical office space in the years ahead,” said Andrea Cross, head of office research, CBRE.

The 65 and older population is expected to double from 2015 and 2055 to more than 92 million and comprise 23 percent of the nation’s population based on estimates by the Census Bureau.

In addition, the CBRE researchers said health care systems nationally are: ” Adopting new technologies in the hope of improving heath care outcomes, reducing costs by relocating services closer to where patients live, utilizing video technology to meet with patients remotely and moving more patient volume away from hospitals – the highest cost facilities – and into lower-cost outpatient facilities, including medical office buildings and urgent-care facilities.”

“I think we are fairly similar in medical office vacancy rates in relation to the types of secondary and tertiary markets of our size,” said Bryan Cole, principal at NAI Keystone. “We, indeed, are reflecting what’s going on overall in the medical field.

“The aging population here is a driving force without a doubt,” he said. “We’ve certainly seen that impact over the past five or six years in the need for health care.

“When you look at the vacancy rates in our area, you see a consolidation happening with multiple practices in one building under one roof. These real estate moves in the health field are often about accessibility and ease.”

Cole said the medical sector locally continues to see growth.

“Several smaller, less efficient medical buildings have been placed on the market for sale or lease, however these facilities are becoming outdated and too small to benefit or attract larger health systems,” he said. “The growth pattern seems to indicate larger, better located facilities, with easy access to customers and better technology.”

In Berks, the medical office growth is stronger in the suburbs and outlying areas as compared to center city, Cole said.

Even though the Berks Community Health Center and a satellite campus affiliated with Penn State Health St. Joseph Medical Center are within the city, the major county health system, Tower Health, is located outside the downtown and so are many other health system satellites and outpatient care facilities.

Older city buildings and fewer competing large health systems overall make for a different medical office vacancy picture in Berks as compared to those larger growing metropolitan centers with competing health systems cited in the CBRE report.

Cole said NAI Keystone doesn’t separately track medical office space, but rather overall market office space in two categories, Class A and Class B. He said the Class A buildings score higher in areas of accessibility, infrastructure, location, amenities, age and specific condition of the properties.

Noting that the local suburban office market was flat through the first three quarters of 2017, Cole said Class A buildings had a roughly 10 percent vacancy rate, while Class B buildings were listed at a 16.98 percent vacancy rate.

In Reading, the 2017 vacancy rate for structures deemed Class A was 7.75 percent, while the less desirable Class B facilities had a 24.50 percent vacancy rate.

Cole said the average rental rates for Class B downtown office buildings are low compared to other markets – $8.50 to $12 per square foot – compared to $11 to $15.50 per square foot for Class A facilities that typically do not include utilities or janitorial services.

In contrast, per-square-foot rental rates for offices in the suburbs are $15.50 to $19.50 for Class B and $19.50 to $24.50 for Class A.

“In our market, we have a lot of clients moving from building to building usually in efforts to increase their footprints (expanded space) rather than going to new locations,” Cole said, noting that new construction in the area has remained flat for the past several years.

While Cole’s report addresses overall office market space versus CBRE’s more narrow breakdown for medical office space, the Class A vacancy rates in both Reading and suburbs were below the national 13 percent vacancy rate for market office space reported by CBRE in early 2017.

Cole cited two building sales, the Teleflex facility along Route 183 and a 200 North Park Road property in Wyomissing, as adding to office vacancy rates in the county this year.

In addition, the V.F. project, which houses many existing tenants, also will probably add additional vacancy space in the next 12 to 24 months, he said.

“At the end of the day, we have a lot of new space on the market today than during the same period last year,” Cole said.

As for commercial real estate signs touting office vacancies, particularly in Wyomissing and Spring Township office complexes, Cole said some of the signs are strategically placed for marketing, but also reflect some tenant movement between buildings or issues involving leasing renewals.

“Basically, yes, I think Berks County is in a good position to meet people’s medical office needs for the future because we have existing structures and land on which to build.

“I’ve seen a lot of real estate reports that come out and blanket everything together, but you have to look deeper at the local situation and account for several factors to get a better indication of what is actually going on,” Cole said.


Steve Willems, SIOR, Notable Transactions

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NAI Keystone’s Steve Willems has just listed 1700 Industrial Blvd. in Pottstown, PA. The 23,036 SF building was former home to Antonelli Institute for the last 31 years and will now be For Sale for $300,000. For more information on this building please contact Steve Willems at swillems@naikeystone.com or 610.370.8506.

Willems represented buyer, Highwood USA, in the purchase of 64 Conahan Drive in Hazleton, PA. The 146,000 SF building will be used to house Highwood USA’s fabrication and supply-chain units. The company extrudes synthetic materials for a multitude of uses and has its headquarters in Schuylkill County, PA

NAI Keystone Commercial & Industrial, which maintains a prominent market share in Berks and Schuylkill Counties, Pennsylvania, specializes exclusively in commercial and industrial properties. In addition to property management and receiverships, NAI Keystone provides brokerage services such as Tenant/Landlord and Buyer/Seller representation, lease administration, commercial financing, consultation services, 1031 Tax Exchange, environmental surveys, and investment sales.


SOLD – 606 Court Street Reading, PA

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NAI Keystone is pleased to announce that Vice President of Sales & Leasing, Kyle McKechnie, has successfully represented Baker College on the sale of 606 Court Street in downtown Reading, PA. The centrally located 26,360 SF office building was most recently used as a satellite location for the college. The property settled on Friday December 15th and was purchased by the Greater Berks Development Fund. The organization, which is an affiliate of the newly formed Greater Reading Chamber Alliance, plans to use the property for operational purposes.

NAI Keystone Commercial & Industrial, which maintains a prominent market share in Berks and Schuylkill Counties, Pennsylvania, specializes exclusively in commercial and industrial properties. In addition to property management and receiverships, NAI Keystone provides brokerage services such as Tenant/Landlord and Buyer/Seller representation, lease administration, commercial financing, consultation services, 1031 Tax Exchange, environmental surveys, and investment sales.

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Sly Fox Brewing Co. Moves into VF Outlet Center

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Sly Fox

NAI Keystone is pleased to announce the completion of the lease of the former Dooney & Bourke outlet located at the former VF Outlet Center, now known as The Knitting Mills, in Wyomissing to Sly Fox Brewing Co. NAI’s John Buccinno represented the landlord, Equus Capital Partners while NAI’s Kyle McKechnie represented the tenant, Sly Fox Brewing Co.

The Pottstown-based brewing company has plans to open up a restaurant in their approximately 5,900 SF space located in the front half of the building. The restaurant’s preliminary plans state they hope to be open by late summer or early fall.

Since the inception of this revitalization project at the VF Outlet Center, and in addition to Sly Fox Brewing Co., NAI Keystone has found a home for UGI Energy Services new headquarters in the old outlet’s ‘Blue Building’ and represented Equus Capital Partners in the sale of the 20,000 SF building formerly used by Rawlings to Orthopedic Association of Reading.

NAI Keystone Commercial & Industrial, which maintains a prominent market share in Berks and Schuylkill Counties, Pennsylvania, specializes exclusively in commercial and industrial properties. In addition to property management and receiverships, NAI Keystone provides brokerage services such as Tenant/Landlord and Buyer/Seller representation, lease administration, commercial financing, consultation services, 1031 Tax Exchange, environmental surveys, and investment sales.


John Buccinno and Bryan Cole complete 146,324 SF lease at former VF Outlet

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NAI Keystone’s John Buccinno and Bryan Cole have executed the lease of a 146,324 SF office space lease on 15 acres at the former VF Outlet in Wyomissing. The lease which has a total value of over $61 million was finalized the end of last year.

There is 19 acres of land remaining for build-to-suit office or flex space opportunities from 10,000 SF up to 100,000 SF. For more information on these availabilities please contact either Bryan Cole at 610.370.8502, bcole@naikeystone.com or John Buccinno at 610.370.8508, jbuccinno@naikeystone.com.

NAI Keystone Commercial & Industrial, which maintains a prominent market share in Berks and Schuylkill Counties, Pennsylvania, specializes exclusively in commercial and industrial properties. In addition to property management and receiverships, NAI Keystone provides brokerage services such as Tenant/Landlord and Buyer/Seller representation, lease administration, commercial financing, consultation services, 1031 Tax Exchange, environmental surveys, and investment sales.

New Listing – 15 acres of land along Rt. 61 in Ontelaunee Township

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Bryan Cole and John Buccinno of NAI Keystone Commercial and Industrial have been retained to exclusively represent Greater Berks Development Fund (GBDF), an affiliate of the Greater Reading Chamber Alliance, in the Sale or Lease of approximately 15 acres of land along Rt. 61 in Ontelaunee Township.

GBDF purchased the land, which was originally 22 Acres and is in the process of subdividing 7 acres which will be sold to an End User.  The remaining 15 acres is ideally suited for industrial or manufacturing users.

The concept plan shows the potential for a two-building site. The site can accommodate users from 10,000 square feet to 140,000 square feet and is located at the lighted interchange of Rt. 61 & Rt. 73 which provides easy access to I-78 and Rt. 222.

“GBDF and GRCA are committed to helping Berks County employers grow and expand their business and local workforce,” said Randy Peers, GRCA President & CEO. “Industrial and manufacturing companies play a large role in our local economy, and the availability of more sites like this one help support existing business growth as well as our business attraction efforts.”

NAI Keystone Commercial & Industrial, which maintains a prominent market share in Berks and Schuylkill Counties, Pennsylvania, specializes exclusively in commercial and industrial properties. In addition to property management and receiverships, NAI Keystone provides brokerage services such as Tenant/Landlord and Buyer/Seller representation, lease administration, commercial financing, consultation services, 1031 Tax Exchange, environmental surveys, and investment sales.

How is Virtual Reality REALLY Going to Impact CRE

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Male and Female Architects Wearing  Augmented Reality Headsets Work with 3D City Model. High Tech Office Professional People Use Virtual Reality Modeling Software Application.

Male and Female Architects Wearing Augmented Reality Headsets Work with 3D City Model.

Virtual reality (“VR”) will create opportunities for everyone. In an excellent article on the topic by The Counselors of Real Estate (read it here), they explain how the use of virtual reality could change every aspect of deal making.

“One of the main uses of VR for real estate is marketing. While the cost of a virtual model may seem high to some, the cost can be offset through the reduction of other marketing spend, a reduction of holding costs by compressing the transaction cycle and accelerating cash flow, which also reduces the risk of closing. The model can also be repurposed for use in facilities, asset and property management. A VR model can save time and money in terms of making design decisions more quickly and avoiding mistakes during the build out of a space. Similarly, VR models can be used to facilitate and make planning meetings or economic development agency initiatives more accessible and efficient by putting models online to help make real-time changes, by any or all of the stakeholders.”

“Transaction friction can also be reduced, as potential buyers or tenants can “see” a range of properties without having to travel to each location. Imagine the productivity gains over the course of a year from being able to see ten properties without leaving one’s office in the time it would take to drive to and from just one property. The use of a VR model can also expand the market for buyers, as the entire globe is now able to see the property. Brokers are able to measure reaction in real-time via embedded audio and video capabilities. This also makes brokers more efficient, as they do not need to coordinate logistics for and host extensive property tours that undoubtedly will include properties that are not given any consideration by the client.”

Let’s take a deeper look at how VR is going to impact CRE.

You’ll be able to visualize developments and properties in completely new ways.

We’ve seen this concept commercially with Lowe’s VR design service, where a customer can see the color of paint in a room before they commit to it. “Developers will be able to complete showroom experience to local and remote clients that allows them to select their own finishes, furnishings and other amenities — before groundbreaking.

Buyers/tenants can instantly see themselves in the space the way they want it, creating the opportunity to shorten sales cycles and sellout periods as well as reduce holding costs,” explains an article by The Counselors of Real Estate. One of the most profound ways they list that leasing brokers and owners will be able to “use VR tools to complete test fits of spaces for potential tenants in real-time, online or on site, without the need to wait for an architect.” Property and asset management can utilize VR for  property and space availabilities, occupancies, maintenance requests or records.

Virtual Reality expedites stakeholders’ decision-making.

An article for Bisnowexplains that “one of the biggest benefits of VR technology is that it enables owners, brokers and tenants to envision a potential master plan, building or interior space quicker and easier than ever before; the immersive experiences allow critical team members to make quick decisions and get the project moving.”

In the article, GA director of virtual design and construction Michael Schroeder says that “with the VR technology, I can engage all the important stakeholders in the process on their own schedule.”

“The technology allows the process to move forward at a quicker pace, enabling crucial decisions to get the consensus response they need. It’s a vital step in saving time for all parties involved.”

Virtual reality allows everyone to be in one place at once.

In CREtech’s articleabout ways virtual reality is changing commercial real estate, they explain that “as foreign investments in U.S. properties continue to increase, being able to make deals remotely is imperative. VR technology allows brokers and agents to show a space to potential clients on the other side of the globe in real-time and as if they are actually walking through the space. Showings are no longer limited by space and time which is resulting in a limitless global base of potential clients.

5 Ways E-commerce Has Changed the Game for Industrial Real Estate

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E-commerce has been a crucial driver in the industrial real estate market for both leasing and investment activity. This new niche market of retail is transforming the entire industrial sector from logistics to warehouse design. Let’s take a look at a few ways e-commerce has changed the game for industrial real estate.

Logistics

The logistics part of the industrial sector is on fire, primarily because of e-commerce. The requirements behind logistics facilities for e-commerce are very different than for in-store retail. As e-commerce grows, retailers will need to expand their logistics space for a variety of reasons:

  • Need to stock a wider variety of SKUs
  • Need more space for processing returned items
  • Need to have more buffer stock on hand
  • Need more space due to individual order picking, packing and shipping directly to the consumer

Facility Locations

One of the biggest differences with e-commerce warehouses and distribution centers are where they are located. In-store distribution vs. e-commerce fulfillment means shipping cases or products vs. shipping a necklace, toilet paper and a pair of shoes directly to a customer. When you do the distribution to stores, you need a location that is semi-rural where land is less expensive and there is plenty of space, but with fulfillment, the opposite is needed. You need to be close to the consumer for quick delivery times.

Different Process

When you are choosing boxes to be delivered to a retail store, the level of automation is low, but when you are choosing specific items to send to a consumer, the automation must increase and requires three times as much space. Fulfillment requires a different location, operation and size than distribution requires. As e-commerce continues to boom, this will affect the number of fulfillment centers vs. distribution centers.

Developers Need to Position Themselves for the Future of E-Commerce

New centers will require bigger buildings, which means developers will need to change the way they approach industrial real estate development. Developers will need to get out in front of it because many companies are underestimating the amount of space they will need for e-commerce operations. Spec buildings will increase in demand due to the growth of e-commerce. Because so much space will be needed to meet the demand for e-commerce facilities, developers who have the buildings will ultimately win the game and will be taking on little risk, because there will always be a demand.

More Fulfillment, Less Distribution

Real estate experts project e-commerce will have double-digit growth every year, which will result in more fulfillment and fewer distribution centers. Consumers are going to purchase more via their mobile devices than they will on their computer and these purchases won’t be lengthy ones, but rather one or two item type transactions. These quick one or two item purchases will affect labor since the labor to pick four one-line-item orders is much more than the labor to pick one four-line-item order. With more labor in demand, more space and resources will be required.

How Did Co-working Fare in 2018?

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2018 was a year of tremendous success and continued growth for the co-working sector. We experienced many large consolidations, new operators entering the picture and new trends in how co-working spaces are operating. Let’s dive into some of the biggest things that happened in co-working in 2018.

Spike in Investment in Co-working

Private equity firms and investors have shown an increased interest in the co-working sector. FlexiOffices, a UK brokerage, experienced a management buyout backed by NVM Private Equity and Industrious raised $80 million in series C funding. Blackstone, the largest private equity firm in the world, acquired The Office Group, which is one of the largest co-working brands in Europe. With Blackstone’s investment, The Office Group can expand and go global. According to Allwork, flexible workspace will represent between 5% and 10% of office inventory in various markets, making it a prime investment option.

Ucommune Gave WeWork a Run for Its Money

Over the past year, Ucommune has acquired rival co-working firms and thus positioned itself has the largest co-working provider in Asia. The co-working company operates over 200 locations in more than 37 cities all over the world and has done so in just 3 years. While WeWork has a current valuation of over $40 billion, Ucommune’s $3 billion valuation will quickly catch up at the rate it is growing.

Corporate Co-working Solidifies

The giant co-working company WeWork has seen a huge increase in the number of companies with 1,000+ employees that utilize their space. Just in the last year, WeWork’s corporate clients have doubled. Companies like Starbucks, Microsoft, Bank of America, and Salesforce all use WeWork space. Twenty-five percent of WeWork’s annual revenue is from these large corporate companies with over 1,000 employees.

Co-working has also transitioned from a trend due to the partnerships we are seeing form between landlords and co-working operators.

Acquisitions and Mergers in the Co-working Sphere

Co-working firms have become targets for cross-border mergers and acquisitions as the sector looks for more opportunities for global expansion. In April 2018, Naked Hub, a regional co-working company based in Shanghai, completed its acquisition of Australia-based Gravity Co-working. Just days later, WeWork acquired Naked Hub in a $400 million deal after acquiring Singapore-based SpaceMob in August 2017. According to Bloomberg, WeWork is actively pushing for expansion further into China, particularly since the company received $4.4 billion in growth capital from Softbank with $1.4 billion dedicated to expansions into Japan, China and Southeast Asia.

Coworking Adopting Franchising Models

There are only two major co-working operators that are utilizing a franchising strategy. Serendipity Labs and Venture X are paving the way for more co-working operators to leverage this model to expand and grow. For example, Ucommune partnered with Serendipity Labs to enter the U.S. market. This deal offered Ucommune instant access to U.S. companies and it encourages international growth while offering Serendipity Labs access to foreign investors as it seeks to expand into other markets.

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