BUILT Marketing Strategies

CCC August Speakers Talk Logistics, Deals, Sustainability and Orlando’s Industrial Real Estate Renaissance

Logistically speaking, Florida’s geography makes the state difficult and expensive. It is more than 440 miles long and 350 miles wide, mostly surrounded by the Atlantic Ocean on one side and the Gulf of Mexico on the other, meaning ground freight shipments can only come into the state from the north. Additionally, Florida does not manufacture much in the way of raw goods, meaning many of the trucks that come here from more centralized Southeastern locations like Savannah or Atlanta leave here empty.

Those logistical challenges of trying to deliver to Florida from warehouses located outside the state have worsened over the past several years as customer preferences for ecommerce versus brick-and-mortar shopping, near instantaneous delivery options from online retailers, like Amazon, and pandemic-fueled economic shifts in labor and supply chains.

Before 2019, “we had about 12 or 13 percent retail penetration via eCommerce,” said David Murphy, executive vice president, CBRE. “That shot up to over 30 percent overnight with the pandemic,” adding that “for every billion dollars of additional eCommerce spent, you need 1.25 million square feet” of industrial space.

Those changes in demand have added tremendous pricing pressure on available industrial space.

“The market has doubled or tripled. Rental rates have doubled. Sale prices have doubled, or in some cases, tripled,” Murphy said, citing a statistic from 2017 when industrial land sold for $150,000 an acre. Today, it is between $600,000 and $700,000 an acre, which has created challenges and opportunities between buyers and sellers, with buildings optimized and built for specific purposes for things like logistics centers, warehousing and fulfillment centers, and new dynamics between tenants and landlords.

“I have clients that are on the cutting edge of their industry and that means that I have to be at the forefront of all these issues as well,” said Cindy Campbell, real estate attorney at Seyfarth Shaw.

Campbell said that she has seen dramatic changes in terms and timing on the contracts she handles, as well as the speed of the transactions.

“Typically, the LOI will say, you have 10 days to return an agreement or a lease. Now, I can’t follow the LOI. Sometimes, she says, she needs to say to a client, “I need this tomorrow!”

Campbell also said the number of deals she is seeing has grown dramatically, closing more than three dozen transactions in one recent year.

Some retailers, such as Amazon, are looking at the buildings they use and the buildings they build in innovative ways to focus on efficiency and sustainability.

Jeff Neville, general manager, Amazon, spoke about the company’s commitment to The Climate Pledge, where more than 300 businesses have come together with the mission of meeting the goals of the Paris Agreement to be net-zero carbon by 2040, 10 years early.

At the construction level, Neville said Amazon is looking at how to construct buildings differently.

He said, the company talks about building vertical, so it does not need as much land. It talks about designing the interior of the building for things like HVAC and using automated and robotic systems in its facilities, which don’t need as much HVAC.

“How do we design the building from the bottom up for energy, conservation and efficiency.”

He said the second side of Amazon’s Climate Pledge commitment is at the corporate level, partnering with local organizations to learn best practices and partnering with local farmers who can use waste food product as fertilizer.

“A lot of the best ideas start small and go big,” Neville said.

Murphy, Campbell and Neville spoke on a panel moderated by DaLila Goodridge, sr. project manager at CBRE, at the Contractors, Closers and Connections (CCC) August event, at Workscapes’ Orlando office. More than 100 people registered for the event, which also served as a fundraiser for Route Seven Orlando, a member-based nonprofit organization of men centered on the principle of growth and development – of self, one another and community. CCC raised $2,500 for the organization at the event.