Industrial real estate has been evolving over the years, but the 2020 pandemic accelerated certain ongoing trends in the industry.

With challenges like limited space, higher demand, and changing tenant preferences, here are some of the ways industrial real estate spaces may change to meet future needs.

Going Vertical

Utilizing vertical space is common in many types of CRE, but it’s a newly emerging trend for industrial real estate.

Horizontal space has been preferred in industrial usage because it’s generally cheaper to operate and more efficient. Taller spaces are difficult to fully utilize for storage, production, or processing. New tech applications and logistics systems have made vertical space much more feasible today than it was before.

Increasing costs for industrial spaces mixed with a strain on supply have pushed more tenants and investors to look into going vertical. The cost of horizontal space in urban areas often outweighs the cost of creating and operating vertical space.

Last-Mile Facilities

Demand for urban industry space is constantly increasing. Part of the drive behind this trend is the need for last-mile processing centers.

As delivery services grow more popular, companies need industrial space for storing and processing customer orders to send out for delivery in local areas. These facilities turn over inventory quickly, so they need to be highly efficient.

Last-mile facilities are the so-called “spokes” in the common hub-and-spoke delivery systems that many businesses rely on today. With customers demanding faster shipping times across all industries, last-mile facilities become more important.

Case Study: Amazon

Amazon is planning for large expansions across Canada to keep up with rapidly growing demand around the country.

In the US, Amazon is already implementing vertical processing facilities around urban areas. Where large industrial properties are hard to come by, vertical facilities can increase capacity, shorten shipping times, and allow for greater efficiency with a smaller footprint.

It’s likely that multilevel warehouses will start to appear in urban areas in Canada as well.

Converting Legacy Buildings

Existing industrial buildings often occupy highly valuable land, especially when they are located within or nearby urban areas.

Increasingly, property owners are looking to either improve their existing industrial spaces or sell to investors who will. The goal is to make existing spaces more attractive to modern tenants.

Beyond location and proximity to customers, industrial tenants today are interested in:

• High ceilings (35+ ft)
• Usable vertical storage
• Smaller horizontal footprints
• Tech-ready designs
• Transport accessibility

When legacy buildings fit these standards or can be adapted to better fit modern tenant preferences, they are more likely to command higher rent.

Retail to Industrial

With many businesses in urban areas forced to close their doors during lockdowns, delivery has become a vital source of ongoing income across different industries. This is a major adjustment for businesses that may not have previously needed any space for processing customer orders for delivery.

Some businesses with large retail spaces are converting a portion of that space into industrial or warehousing space. This is especially obvious with large retail stores like department stores or shopping centers. Grocery stores have been largely unaffected by this trend, as their stores already work well for mixed use.

The conversion from retail to industrial has been more pronounced as businesses embrace the long-term switch to e-commerce and delivery. Changing the use of space from retail to industrial is seen as a way of investing in future online sales.

Please call us at 1 800 980 6668 or check out www.creiland.com to learn more about our services and how we can help to help maximize the potential of your industrial/retail assets.