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Industrial Real Estate Developers Investing In Tech To Attract Tenants

E-commerce demands for next-day delivery, industrial labor shortages, and advances in indoor cultivation and food production are reshaping the design of warehouse spaces.
Workplace amenities, energy efficiency, and automation, are rapidly becoming critical to securing industrial property tenants according to panelists who spoke at Biznow’s Midwest Industrial and Logistics Summit last week.
Once considered premium improvements, 40-foot clear height ceilings, dedicated on-site trailer storage areas, 60-foot speed bays, LED lighting, and oversized employee parking lots have become must-haves for industrial tenants said Barry Missner, CEO of Chicago-based Missner Group.
Industrial property tenants are looking for better workplace amenities designed to address the tight, localized labor markets and shortage of workers in warehouses, said Geoffrey Kasselman, Executive Managing Director at Newman Knight Frank.
“More so today than ever today, tenants want amenities focused on ramping up productivity in the work environment,” said Kasselman.
Kasselman, who leads Newman Knight Frank’s national industrial practice, said amenities such as health and fitness facilities, basketball courts, jogging tracks, on-site cafeterias, and commissaries are becoming more popular as more companies focus on increasing workplace productivity and employee satisfaction.
Offering on-site job training programs is also becoming more common as e-commerce tenants attempt to manage to retain employees amid the growing shortage of workers in the industry.
Energy efficiency has become a critical area of interest for massive power and water users in the agri-tech and food production sectors, said Wendy Berger, CEO and Founder of WBS Equities, LLC which specializes in the construction and development of industrial warehouses for food and beverage manufacturers.
“We try to design energy efficient systems with a goal of reducing bottom-line operating costs,” said Berger, who highlighted that one of the firm’s clients, Amy’s Kitchen, a national organic frozen food manufacturer, has set a goal to achieve zero waste to landfill at its production facilities.
Facilities outfitted with infrastructure that can easily deploy reverse osmosis water filtration systems for indoor cultivation of cannabis and other equipment designed for CBD oil extraction and manufacturing soft-drinks and candy will become popular as more cannabis-based products start to enter the mainstream consumer marketplace, said Berger, an early investor in the marijuana industry.
As more industrial space is used for purposes of indoor cultivation and food preparation, the number of monitoring systems required to create optimal environments are increasing rapidly.
“Truly the holy grail for building maintenance systems would be integration,” said Berger. “There are more than19 different systems that need monitoring to create an optimal environment, and these systems need to communicate.”
Industrial property owners need to become more flexible on lease terms.
“The ultimate amenity is flexibility,” said Kasselman. “It’s hard to expect tenants to sign five to ten year leases and to get landlords to pay for build outs if they don’t know where their business will be.”
Finding ways to reduce the upfront cost of build outs is a constant balancing act, panelists said. The cost per square foot for food manufacturing and agri-tech facilities can be triple those of a standard build.
A primary challenge to the adoption of technology in the industrial sector has been the inability for developers to justify costs of tech add-ons to underwriters and lenders.
“Currently, there isn’t enough data available to justify the costs of adding improvements,” said Missner.
Industrial property developers who are building for the long-term are less likely to adopt technology solutions because it’s hard to forecast what will be needed 10-15 years from now, panelists said.
“If you are building to hold, you will likely build yesterday’s building,” said Kasselman.
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Despite cost challenges, forward-thinking developers are becoming more strategic about future proofing developments today for tomorrow’s needs, said Kasselman.
“If loss of power for one day can result in millions lost in e-commerce sales, wouldn’t you spend an extra million dollars for extra power services?” Kasselman asked.
“There is a speculative build in Chicago where they have decided to pre-wire the parking lot with conduit so that when the shift to electric cars takes place, they are ready,” said Kasselman.
“It’s about looking down the chessboard three to four moves, so you can remain ahead,” he said.

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