A deep-dive into the Industrial Real Estate market by Doug Fura.
The industrial real estate marketplace is experiencing near-record low vacancies. As 2018 came to a close, industrial real estate vacancy had shrunk to 4.9 percent—part of a larger trend that has seen that number cut in half since 2009. In the last quarter of last year, the overall availability of industrial space fell by 10 basis points, all the way down to 7.2 percent.
That trend has significant implications for industrial tenants. Because the fact that the industrial real estate marketplace continues to tighten—and there is, consequently, relatively limited inventory of large move-in-ready industrial spaces—companies looking for quality space have few options available to them. New construction is one possibility. But these projects are costly, complex and time-consuming and require a different skill set then most organizations core business typically supports.
In that context, it is not difficult to understand why design-build has emerged as an increasingly popular alternative that offers an appealing way forward. The rise of design-build can be seen across all sectors and across the U.S., and design-build is projected to account for nearly half of nonresidential construction spending between 2018-2021.
Industrial design build projects represent a fairly small component of that market. And, in a broker space where there are few providers capable of representing industrial clients—and fewer still who can guide them through a complex process in a smooth, efficient and cost-effective manner—navigating this highly specialized sub-sector successfully can be a challenge.
Industrial and manufacturing tenants interested in a design-build solution should be selective and strategic when evaluating potential broker partners. The specific characteristics they should be prioritizing include the following:
Don’t make the mistake of assuming that just any real estate consultancy or brokerage can provide high-quality, cost-effective results and a smooth and seamless design-build process. Demonstrated design-build expertise offers a compelling advantage that allows the process to move forward efficiently and potentially realize significant savings in the process. The ideal design-build partner should be able to provide professional guidance and high-level services regardless of whether the requirement is for lease or if the end goal is to own the property. If possible, identify a list of go-to commercial real estate resources in your market. When evaluating potential partners, determine not only the extent and quality of their previous design-build work (with a special focus on any relevant experience in the industrial space), but also whether they have worked with clients in your specific industry.
Prioritize design-build partners who don’t just know what they’re doing, but where they are doing it. Regional expertise is the currency of any brokerage, and is no less important when considering design-build partnerships. Identifying the right property and the right opportunity, and knowing when, where and how to maximize market-specific value is something that only a deep regional insight and intimate market knowledge can provide.
Resources and professional partners
Even some the most experienced and capable brokerages and commercial real estate consultancies bolster their design-build service and expertise by forging a professional partnership with a real estate solutions company with expertise that complements their own. From construction services to real estate projects and move management capabilities, these partnerships can add valuable new elements to the design-build equation, and should be viewed as potential difference-makers.
Turnkey service model
That right combination of experience, deep resources, specialized expertise and a comprehensive scope of service adds tremendous value to the design-build process. Providers who can deliver all of those elements can operate as a true all-in-one solution provider for industrial construction projects. A select few design-build providers extend that concept of all-inclusive service to the next level, however, not only guiding clients through the construction process, but also through the relocation process, as well. In other words, they are capable of handling all of the burdensome and potentially costly logistical headaches and complexities that plague any large-scale relocation, from phones and furniture to incidentals. The result is a truly holistic scope of service that elevates the design-build to a true turnkey solution.
Whether you are an automotive supplier, warehouse operator, manufacturer, defense contractor—or any other business with specific industrial real estate needs—if you have done your research and due diligence and thoughtfully selected a design-build partner, you will be rewarded for your time investment. The right partner—with the relevant experience, resources, market insights and expertise—can be a true difference-maker, uniting in-house experts and extensive resources to strategically plan and execute every aspect of the industrial design, construction and relocation process. The result should be nothing less than high-quality, high-value industrial design-build construction—delivered on-time and on-budget.