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Commercial Real Estate
Business Observer Friday, Dec. 20, 2019 9 months ago

New Commerce

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Online shopping is changing the industrial real estate sector in Southwest Florida.
by: Kevin McQuaid Commercial Real Estate Editor

Although it is often associated more with the Interstate 4 Corridor, between Tampa and Orlando, e-commerce-fueled logistics have also taken hold in Southwest Florida.

There, Amazon, Wayfair and others are snatching up prime industrial properties and sites for so-called “last mile” distribution to a growing consumer base — and more are expected in 2020.

In March, Amazon leased 60,000 square feet — among the largest warehouse leases in the three-county region comprising Charlotte, Lee and Collier counties over the past year — in the Airport Woods Commerce Center, in Fort Myers.

The 10016 Bavaria Road building, about four miles from the Southwest Florida International Airport and previously occupied by Eastern Metals Co., is slated to employ 500 when it is fully operational in the KP Properties of Florida-owned building.

More recently, Wayfair LLC in October committed to leasing 47,400 square feet in Knott Realty Group’s Meridian Center, a two-building speculative development the Timonium, Md.-based company began work on in August 2017.

Like the Amazon fulfillment center, the 10400 Meridian Center Parkway project is only a couple of miles from Southwest Florida International.

“Interest is emanating from manufacturing, distribution and e-commerce requirements, including last-mile operations interested in servicing a growing Southwest Florida population,” Knott Realty Vice President of Leasing Taylor Fields says in a 2018 statement about the 27-acre project.

“Last mile” distribution has become a familiar refrain in the I-4 Corridor, where Amazon, Walmart, Best Buy and others operate regional distribution centers to deliver goods to some 18 million residents within a five-hour tractor trailer drive, and where those same logistics companies maintain smaller facilities to support larger warehouse hubs.

Driven by consumer demand for faster deliveries, companies like Amazon are establishing industrial footholds in more urban areas closer to population centers to shave minutes off drive times and package placements at households.

In Southwest Florida, the concept of “last-mile” delivery is upending the traditional understanding of industrial real estate.

“Traditionally, warehousing in Southwest Florida has been 60% or more related to housing and construction and associated trades,” says Bob Johnston, a principal in Lee & Associates Inc., a Southwest Florida commercial real estate brokerage firm that specializes in industrial properties.

“But now more and more tenants seem to be involved in e-commerce. It’s been a real game changer.”

As a result, too, smaller but well-located existing distribution centers have found new life as “last-mile” warehouses.

“Last-mile centers are set up differently than, say, a one million-square-foot fulfillment operation Amazon might have in Lakeland,” Johnston says.

“Because merchandise is typically in and out on the same day, they don’t require high-cube racking,” Johnston says. “Amazon’s building in Airport Woods has only an 18-foot clear ceiling height, for instance.”

Even in new projects where ceiling heights are typically higher and other features more modern, such as Knott’s Meridian Center and Premier Airport Park — a 225-acre project adjacent to Southwest Florida International slated to contain 1.87 million square feet of industrial space at build out — logistics firms are flocking to lease space.

“We’ve seen a great deal of interest from retailers and third-party logistics companies,” says Dan Miller, executive managing director of industrial services at commercial real estate brokerage Colliers International, in Fort Myers.

“Demand is stronger, in fact, than I have ever seen it, and e-commerce is a large part of what’s driving it,” Miller adds. “It’s really become more and more popular with every segment of society, from baby boomers to millennials, and it’s understandable: It’s easy and convenient.”

Driving the demand, however, is population growth.

Southwest Florida is currently home to 1.3 million residents, and urban centers like Fort Myers are expected to grow by more than 15% over the next decade and double in population by 2050, according to U.S. Census estimates.

“Southwest Florida has hit a critical mass in population, and as a result, it’s a good market for e-commerce participants to access,” Miller says.

For landlords, the influx and growth in population has netted other benefits. Because e-commerce purveyors need to be close to both people and transportation networks, they are often willing to pay higher rental rates than many tenants to be in top-tier properties, Johnston and Miller say.

“They need to be close to Interstate 75 and the airport, but they also need to be on the ‘right’ side of the highway and the access streets so they have the easiest access,” Johnson says.

But while e-commerce as a subsegment of industrial leasing and development is growing, Johnston and others caution that the region is running out of larger tracts of land capable of supporting last-mile delivery.

He adds that with parking, trailer storage and required tractor-trailer turnarounds, developers need about 10 acres of land for every 100,000 square feet of industrial space constructed.

“There’s just not enough 10- to 20-acre parcels that are well-located or zoned for industrial space left in Lee or Collier counties. “There’s maybe three or four 50-acre parcels left, and as tenant requirements get bigger, that could be a problem.”

At Premier Airport Park, owner Principal Real Estate Advisors is developing a series of speculative buildings measuring 106,000 square feet to meet market demand. Currently, a first building in the roughly $200 million project is available and being leased and a second is nearing completion early in 2020.

But while prime sites are few, several developers have plans in the works to take advantage of the trend.

East Group has available land in Fort Myers just off Interstate 75; Knott Realty has plans for a second building at Meridian; and Benderson Development Co. recently receive approvals for a new industrial site in the North Port section of Sarasota County that could accommodate up to 500,000 square feet that would serve the Southwest Florida market.

Johnston believes e-commerce has only just begun to make its impact felt in the region.

“With the societal changes taking place, I don’t see demand (for last-mile” distribution facilities) diminishing,” Johnston says.

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