radical re-design- how the industrial real estate boom is changing the market forever
Post on 22-Jan-2018
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How the current industrial boom is changing the market forever
“RADICAL RE-DESIGN”
Steve Kapp, SIOR
Executive Managing Director
skapp@newmarkccarey.com
o There is a chat box located in the bottom left
corner of the web conference interface.
o If at any time during the presentation you have a
question, please feel free to type your question
into this chat box and select either me or the
group as a recipient.
o Slides are numbered for reference.
WELCOME
- 1 -
Key Points
o New industrial development in the San Francisco East Bay is
at its highest levels since the 1990s
o This cycle - 58 new buildings totaling over 16MM SF in the
greater East Bay, with 41 buildings and 8.5MM in the I-880
corridor.
o Features and design of these new “Class A” buildings are
significantly different than last cycle.
o Will existing “Class A” buildings be downgraded to “Class B”
as new construction comes on-line?
- 2 -
I-880 Corridor Warehouse Inventory
- 3 -
Class A
Class B/C
Total I-880 Warehouse Inventory
72,687,952 SF
Class A
40,593,488
Class B/C
32,094,464
“Class A” Warehouse Inventory
- 4 -
I-880 Corridor Totals // Total SF: 49,053,979
40,593,488
8,460,380
-
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
City# of Bldgs
TotalInventory (SF)
# of Bldgs
Planned/U/C
Total SF
Planned/U/C
Oakland : 13 2,838,947 2 630,725
San Leandro: 49 5,809,807 3 685,974
Hayward : 113 13,320,807 8 1,090,146
Union City: 43 5,643,564 5 931,670
Newark: 21 3,777,620 3 717,028
Fremont: 33 9,202,854 20 4,404,837
I-880 Totals: 272 40,593,599 41 8,460,380
I-880 New/Planned/Under Construction 8.5MM; 17.25%
Existing Inventory40.6MM; 82.7%
Warehouse-Breakdown by City
- 5 -
“Class A” Warehouse Inventory
9,202,854
2,838,947
5,809,807
13,320,807
5,643,564
3,777,620
0
2000000
4000000
6000000
8000000
10000000
12000000
14000000
Fremont Oakland San Leandro Hayward Union City Newark
Existing Inventory: 40,593,599 Total SF
New Construction: 8,460,380 Total SF
4,404,837
630,725 685,9741,090,146 931,670 717,028
Fremont Oakland San Leandro Hayward Union City Newark0
1000000
2000000
3000000
4000000
5000000
New Construction Timeline
- 6 -
Development Status1
49
,75
87
00
,00
0
57
4,6
40
37
4,7
25
24
7,0
00
33
4,0
00
20
0,0
00
17
4,0
00
30
2,5
64
51
7,8
95
30
0,6
20
16
1,4
83
35
0,0
00
62
3,9
20
29
7,0
50
26
6,1
49
14
2,3
88
27
4,9
98
60
0,0
00
25
6,0
00
49
,00
9
15
0,0
00
27
7,4
91
40
0,0
00
30
0,0
00
0
150,000
300,000
450,000
600,000
750,000
900,000
Completed Under Construction Planned Availables
2014 2015 2016 2017 2018 - Beyond
Planned Industrial Development
- 7 -
Late 2017 and Beyond
Site Developer CityPotential
Development Size
Point Eden IPT Hayward 150,000 SF
KraftTrammell
CrowSan Leandro 450,000 SF
W. Winton TBD Hayward 400,000 SF
Eden Shores Steelwave Hayward 93,000 SF
Georgia Pacific OMP San Leandro 280,000 SF
LDK Harvest Richmond 700,000 SF
Pacific Commons ARA Fremont 816,000 SF
Pacific Commons OMP Fremont 1,780,000 SF
Port of Oakland Prologis Oakland 500,000 SF
The Oaks Balch Livermore 142,000 SF
TOTAL 5,311,000 SF
Who Are the New Users of Space?
- 8 -
o E-Commerce/ Order Fulfillment
o Advanced Manufacturing
o Food Distribution/ Food Processing
o Tech
o Automotive (Tesla)
Warehouse Demand by Sector
- 9 -
Last 24 Months
TECH2,809,000
3PL4,482,000
Food1,743,000
General WH4,396,000
Moving/Storage850,732
Business Services1,634,386
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
5,000,000
Warehouse Users By Leased Square Feet
18%
28%
11%
28%
5%
10%
- 10 -
Feature Then (1980s-1990s)
Average Building Size 100,000 SF
Clear Height 24’
Staging 90’ -105’
Sprinklers .33/3,000
Trailer Parking Minimal
Security Open Park
Communication Phone Line
Landscaping After Thought
Restrooms Small Single Fixture
Now (2014 -2016)
250,000 SF
32’ -36’
120’ -135’
ESFR
Designated
Securable Perimeter
High Speed Internet
Featured, Drought
Tolerant
“Office” Quality
Why
Higher cubic volume.
Bettermaterial handling
equipment.
53’ trailers and
containerized shipping.
High throughput operations.
Product needs to be rapidly
transferred.
Security is important to both
value of product and
employees.
Attracting female workforce.
Workforce demographics
changing.
More effective, better able to
spread cost of material handling
& infrastructure costs.
Changing fire codes and higher
cubic volumes of product.
Real time exchange of
Information, Big Data Analytics.
“Green” Building image.
Lower maintenance costs.
Industrial Building Comparison
Rental Rates Rise but Returns Stable
- 11 -
2014 2015 2016
Rent/PSF $0.50 $0.60 $0.70
Construction Costs/PSF
Land (under building)
@ 42% coverage$43.00 $59.50 $76.20
Shell & Site $52.00 $55.00 $58.00
TI (from shell) $3.50 $5.00 $8.00
Soft Costs
@(25% (Shell, TI)$13.888 $15.00 $16.00
Totals $112.38 $134.50 $158.70
Return on Cost 5.34% 5.35% 5.29%
Conclusion
- 12 -
o New construction in this cycle has increased
inventory by almost 20.6%.
o Features designed into buildings dramatically
different than last cycle.
o Tenant demand for warehouse and typical tenant
profile has shifted.
o 1980’s vintage “Class A” product –still strong
appeal to small to mid-size users.
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