January 7, 2020

New ASB Industrial Investments Gain from E-Commerce Trends

ASB’s recently closed $100.5 million acquisition of the Bloomington Logistics Center, in Southern California’s Inland Empire, is the latest in a series of prime industrial investments completed across the U.S. totaling $665 million since mid-year 2018.

As American consumers increasingly turn to e-commerce to shop, ASB continues to focus on industrial distribution-warehouse while limiting retail exposure to select brick-and-mortar urban locations. As of Q3 2019, e-commerce commanded 10.8% of total retail sales in 2019 (according to the U.S. Census Bureau) and recent Christmas buying patterns highlight further significant year-over-year online shopping gains. These cyber-buying trends continue to create additional demand for specialized logistics space as e-commerce supply chains require up to three times more warehouse space than brick-and-mortar retail.

Fulfilling e-commerce orders requires a regional and local network of bulk facilities that tie into “last mile” warehouse space embedded in major metropolitan areas as close as possible to commercial centers and residential neighborhoods.

Tenant demand for space from third-party logistics, e-commerce businesses, and global shipping companies has driven industrial vacancies to historic lows—hovering near 5%—and according to CBRE this demand has exceeded supply in each of the past nine years, consistently pressuring rents upward.

The evident paradigm shift to the convenience of internet shopping should help ensure growing long-term leasing demand in industrial markets especially for well located facilities that can accommodate a constant flow of trucks delivering shipments that are quickly sorted and redirected for local distribution. Today’s logistics warehouse tenants are focused on well located assets with excellent access that enhance their ability to deliver e-commerce packages quickly and efficiently to residents in urban areas.

ASB has focused investments in key regional distribution hubs including the Inland Empire, San Francisco, Northern New Jersey (New York City), Boston and Houston while making select “last mile” investments in fast growing population markets such as Denver, Miami, Tampa, and Fort Lauderdale as well as in severely supply-constricted cities like Pittsburgh.

Over time industrial properties have produced reliable and consistent returns for core real estate investors and have been major contributors to attractive, long-term NOI growth. In fact, industrial is the only product type recording annual, double-digit total returns (11-13+%) in the NPI Index over the past 10 years. E-commerce trends have only heightened the enduring attractiveness of industrial properties serving the reconstituted supply chain and should underpin the strong income-oriented returns ASB seeks.