Written by: Joel Yakovac, SIOR
Joel Yakovac is a member of the Columbus Industrial Team at Colliers International and specializes in industrial sales and leasing. He focuses on new business development and prospecting new tenants, buyers, landlords and sellers. Joel works with local companies throughout Central Ohio as well as large corporations across the United States. Keep reading to get Joel’s take on current trends in the industrial market.
Despite the pandemic, industrial construction in Columbus is still booming. Do you anticipate construction activity to stay fairly consistent in the near future?
There are quite a few proposed projects I suspect will push toward under construction in the bulk space. Late 2020 and early 2021 will be telling for sure as we continue post-COVID, but I wouldn’t be surprised if we see a slowdown in overall construction projects purely due to the amount of activity we are seeing currently. We are at historical highs and feel some time to absorb will be needed, especially in the “regional DC” (buildings catering to 50,000 – 200,000 SF tenants).
One trend being discussed recently is the conversion of retail space into industrial space due to high demand and warehouse rents. Do you think there’s any value to this?
Yes, this seems to be a very viable option, especially for last mile uses and reverse logistic locations. These centers are well positioned within dense populated areas to serve appropriately. The issue will be realized rents and retrofitting of the properties to suit the needs. Many of these properties were not built with these uses in mind and thus renovations could prove extremely costly. Further, typical retail rents are well above industrial expectations, within reason. A pure warehouse distribution tenant is seeking low rents, but to access the population and strategic locations can drive a potential for higher price. I still think well below typical retail rents and coupled with improvement costs may not fit every center.
Have you seen this happening in Columbus? If not, do you think Columbus will start to experience this?
We have not thus far, but expect we will shortly. I had personally always wondered why Sears did not try to pivot and utilize their network of stores in such a fashion. I respect this is easier said than done, but believe retailers will try to leverage their positions if possible.
Rising e-commerce demand is another hot topic in industrial. Do you anticipate this to decline at all post-COVID? Why or why not?
E-commerce has been the hot topic for several years prior to COVID and I only suspect COVID has accelerated the push. Several studies have been done and year-end consumer good product sales is still predominately done in retail. E-commerce sales continue to improve year over year, and I suspect this year’s numbers will be one of, if not the largest jump when comparing. It seems to be feeding the instant gratification of the population and I don’t see that it will change any time soon.
Logistics has thrived during the pandemic, but manufacturing has been very hard hit. What do you think we can expect for the future of manufacturing?
I believe this is more so due to the denser nature of manufacturing and employees in manufacturing. Manufacturing users not deemed critical were unable to operate and thus reflected poorly on the numbers. As we re-open post-COVID and navigate, I believe the effects of COVID, reliability from China, and the overall supply chain will push for more near/onshoring activities. The cost savings to produce overseas continues to narrow, and is starting to push manufacturers back. There had been some of this prior to COVID, but especially could be several specific industries we see huge growth with new locations/plants being opened in and around North America.