By Linda Booker, Executive Vice President and CFO, Core5 Industrial Partners
I admit it; internet shopping has changed my life. I initially resisted, but like most busy moms, I realized that I could get far more done in a day if I order my books, non-perishable groceries, and office supplies online. As we got ready for Spring Break, a steady stream of bathing suits, clothes, and shoes came to our door with my daughter’s name on them; she insisted that she will return half of them because of free return shipping.
According to the U.S. Census Bureau, internet sales are up almost 80 percent from just five years ago, but still only account for about 7.5 percent of all retail sales in the U.S. Years ago there was a fear that this trend would render traditional bricks and mortar retail shopping obsolete, but the researchers underestimated the female population’s need to shop in person! Still, many retail stores are becoming more like showrooms – touch and feel the product, and then order it to be delivered straight to your door.
The changing way that consumers shop has resulted in a huge impact on industrial real estate. Traditional bricks and mortar retailers have been forced to try to figure out these new distribution channels, sometimes using existing distribution facilities, but more often using new facilities for their internet sales fulfillment. As an example, a major home improvement retailer may have had a distribution center that delivered boxes of 100 hammers to its retail store; however, delivering one hammer direct to a consumer requires a completely different model. That model needs to be efficient to keep costs down, accurate, and quick – and therefore automation often comes into play. Today’s distribution facilities are not your father’s warehouse – they are developed to optimize a user’s distribution model, often approaching one million square feet with ceiling clear heights of 36 feet to house sophisticated material handling systems. Since 2010, one-third of all industrial leases over 500,000 square feet have been for e-commerce purposes, according to an article written by USAA’s Research Department.
Companies are now competing to reach the consumer more quickly, leading to another trend in industrial real estate. Historically, industrial buildings were outside of the city center, on major interstate corridors. A company may have chosen a distribution model with three facilities across the U.S., in order to distribute by truck to the majority of the population. Now, it’s important for internet sellers to be closer to the population in order to get their products there next day, or even same day. This has led to the need for industrial facilities closer to the roof-tops of major population bases, in order to provide that “last mile” fulfillment. There is also a trend to position facilities close to air hubs, in particular for high cost products – which has led to more companies locating facilities in locations like Memphis, Indianapolis, and Cincinnati.
Industrial real estate has never been the sexiest product type, but it has become an increasingly more important player in today’s consumer landscape. I will never completely get over my need to touch and feel products in retail stores, but the ability to order a product and have it at my door the next day is very appealing! Given that e-commerce sales are still a relatively small part of overall retail sales, there is still a long way to go, leading to an even bigger focus on distribution and therefore, industrial real estate.
As Executive Vice President and Chief Financial Officer, Linda oversees the Core5 Industrial Partners assets and is responsible for the development and overall command of the company’s financial operations, including accounting, treasury and finance functions. As a founding partner, she plays a lead role in the company’s financial planning and forecasting and maintains relationships with investors and key stakeholders. Linda was named a “Woman of Influence” by Real Estate Forum which honors outstanding women in commercial real estate and in 2009, the Atlanta Business Chronicle named her “CFO of the Year” for her invaluable contribution to the success of her employer as well as the communities the company served. Atlanta Woman magazine also honored Linda as one of “20 Women on the Way” in recognition of her career accomplishments and community involvement.
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