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The New Normal for Office Marketing

Source: Globe Street

While Hines’ Senior Managing Director John Heagy was able to close a massive deal with Microsoft at the 523,000 square-foot Atlantic Yards office development in West Midtown Atlanta in May, he admits COVID has upended the office leasing process.

“There is no question that the environment for traditional marketing has been completely rocked,” Heagy says. “While we were working with Microsoft [before the pandemic], we were able to show space, have meetings with them directly and meet them at the site on a regular basis. We’re just not able to do that right now.” 

While brokers are now able to meet with clients again, if both parties are willing, the process is still cumbersome. Everyone is wearing masks, staying socially distant and arriving in different cars.

“You’ll hear that [that the process is cumbersome] from brokers that you talk with on the ownership side, but we have worked pretty hard to make it as easy as possible for brokers to do tours with us,” Heagy says. 

Like many firms, Hines has adopted virtual leasing to supplement more limited in-person interactions. “We’ve gotten really good at doing virtual tours,” Heagy says. “Whether we’re taking up a camera and introducing ourselves over the camera and then walking around the building and doing the tours via Zoom or other means, we’ve gotten very good at doing that end of the presentation.”

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Walmart Delivery Drones Take To The Sky

Source: BISNOW

Walmart is planning to launch a test of drone delivery in a limited area near the company’s headquarters in northwest Arkansas. For now, the program will use drones to deliver various health and wellness products within a 50-mile radius of the HQ, but the retail giant says the system has the potential to expand to other sorts of merchandise.

The company has inked a deal with drone specialist Zipline to facilitate deliveries. Zipline drones fly to predetermined destinations and drop packages attached to parachutes. The drone releases its payload based on real-time wind data, with a goal of floating the package precisely to its recipient, the company says.

San Francisco-based Zipline is best known for delivering medical supplies in recent years via its drones to places in rural Rwanda, whose road network is poor, which precludes easy delivery by more conventional vehicles. Since the company began its operations in that country in 2016, Zipline has delivered more than 200,000 shipments of medical products there and elsewhere in Africa.

Each of the Rwandan drones is capable of carrying about three-and-a-half pounds of medical supplies, flying at speeds of nearly 80 mph, according to Zipline. It isn’t clear yet how much an average payload will be when flying for Walmart, based on Walmart’s announcement of the deal with Zipline, nor did the retailer say how much the service will cost package recipients.

The tech Zipline uses in its drones includes a system that keeps its GPS always connected, even when the aircraft is waiting on the ground, as well as a rail fitted with a pulley and an electric motor used to launch the drone skyward at a speed fast enough for it to fly, and a system to capture returning drones. Each of those systems saves time during the preparation to launch.

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KKR Snags Last-Mile Facility Near Atlanta Airport for $22M

Source: Connect Atlanta

KKR has acquired Atlanta Last-Mile Center, a recently renovated, 205,541-square-foot, last-mile industrial facility adjacent to Hartsfield-Jackson International Airport in Atlanta. The sales price was $21.7 million.

Located on nearly 30 acres at 2750 Sullivan Rd., the facility provides easy access to one of the world’s most traveled airports as well as a CSX rail spur across the street. The center is currently leased to two tenants, including one of the world’s largest e-commerce companies, which uses the property as a last-mile delivery station. In 2016, the facility underwent $5 million in capital improvements, including a 37,200-square-foot expansion, new truck courts, new dock doors, renovated interior, new electrical system and new ESFR sprinkler systems.

Britton Burdette, Matt Wirth, Pete Pittroff, Dennis Mitchell, Mitchell Townsend, Crosby Taylor and Stephen Bridges of JLL represented the seller, a joint venture between Hardie Real Estate Group and Palatine Capital Partners, in the transaction.

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Trammell Crow gets $3.8M tax break to build Home Depot distribution center

Source: Atlanta Business Chronicle

Developer Trammell Crow will receive a $3.8 million tax abatement to build a new Home Depot distribution center in the city of Stonecrest, but the final tally on tax incentives for the facility is not yet known, according to the state.

Home Depot and Gov. Brian Kemp announced last month the Atlanta-based home improvement giant was building the Stonecrest facility and distribution centers in Locust Grove and East Point over the next 18 months to support the growing demand by professional and “do-it-yourself” customers for flexible delivery and pick-up options. The Georgia Department of Economic Development worked with the cities and DeKalb, Fulton and Henry counties on tax incentives during a competitive process to ensure Home Depot would build the new centers in Georgia. Home Depot said the new facilities would add 1,000 new jobs.

Trammell Crow, the Dallas-based real estate titan, a subsidiary of CBRE, was granted the 15-year, $3.8 million property tax break from Decide DeKalb as part of a resolution to issue $60 million in revenue bonds. Decide DeKalb is the economic development authority for the county. The $60 million is to be used to finance the land purchase and construction of the 615,000-square-foot facility. The center is being built at an industrial park at 2182 Coffee Road, close to Interstate 20 and with access to CSX rail.

The Decide DeKalb board also approved issuing $5 million in revenue bonds to Home Depot for the purchase of machinery and equipment for the new distribution center. Tax savings to Home Depot over 15 years of the bond is $320,687.

In addition, the board approved a resolution saying it would seek a Regional Economic Business Assistance (REBA) grant, a state incentive program used to “close the deal when companies are considering Georgia and another state or country for their location or expansion,” according to the state Department of Community Affairs.

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Amazon, Big-Box Chains, 3PLs Among the Most Rapidly Expanding Industrial Tenants

With e-commerce sales booming, these companies are leasing up new distribution and fulfillment facilities.

Source: National Real Estate Investor

Online sales shot up during the COVID-19 quarantine, causing many companies to rethink their logistics strategies. As a result, a number of e-commerce players are aggressively expanding their physical footprints to improve their fulfillment and delivery capabilities.

According to data from the U.S. Census Bureau, e-commerce sales accounted for 16.1 percent of total retail sales in the second quarter of 2020. On a non-adjusted basis, the estimated second quarter total for U.S. e-commerce sales was $200.7 billion, an increase of 37.0 percent from the first quarter and up 44.5 percent year-over-year.

That change in the retail marketplace is being driven by consumers and is here to stay, according to Greg Healy, senior vice president for supply chain solutions and workforce analytics in Colliers International’s Inland Empire office in Southern California. “We aren’t going back, so companies need to learn how to embrace and succeed in this new paradigm,” he says. A retailer might not necessarily need a storefront to succeed anymore, but does need a robust supply chain strategy.

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Road to Recovery: Private Capital, Supply Chain, and the Economy Ahead

Source: Balentine

  • This Road to Recovery series hosts discussions around long-term implications for business owners. Topics include private capital, supply chain, and the economy ahead. The latest discussion featured Vistage’s Joe Galvin, Frank Blake (former CEO of the Home Depot and current Chairman of the Board of Delta and Grady Hospital) and macroeconomic research company Strategas.

At Balentine, we’re committed to not only helping clients through these tough times, but also acting as a convener and aggregator, addressing the most pressing concerns on the Road to Recovery. Our series pulls in thought leaders & experts across different industries to share their unique vantage point on what lies ahead.

Visit the website to watch the full series.

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Amazon to expand its e-commerce network with latest Doraville project

Source: Atlanta Business Chronicle

Amazon.com Inc. continues revving up its fulfillment center engine across Atlanta, with a new project in the works along the Perimeter.

Amazon is considering a 20-acre industrial property just north of I-285 on the Gwinnett-DeKalb county line, where it would occupy 121,017 square feet of space for a new delivery station, according to public documents and sources familiar with the project.

Atlanta-based real estate company Seefried Industrial Properties Inc. would develop the property, which stands along Interstate 85 amid a collection of 1980s industrial buildings at 6945 Button Gwinnett Drive and 4600 Northeast Expressway. In the past, Georgia Pacific and Levitz Furniture have operated facilities there. Seefried has entered a contract with the owner of the properties and would buy them, according to an intergovernmental agreement between Gwinnett County and the city of Doraville.

Seefried would redevelop the site for Amazon, sources with knowledge of the project said. An Amazon spokesperson said the company typically does not comment on an expansion of its logistics network until a lease has been signed.

Amazon has been rapidly expanding its delivery stations across Atlanta, with the potential Doraville site becoming the latest example. Earlier this year, Amazon said it was opening three new delivery stations in metro Atlanta in 2020, creating hundreds of full-time and part-time jobs, paying a minimum of $15 per hour. The new delivery stations will be located in Atlanta, Buford and Fairburn. 

Delivery stations provide the last mile of Amazon’s order fulfillment process. They receive packages from fulfillment and sortation centers, which are then loaded into vehicles for delivery to customers.  Amazon has more than 150 delivery stations in the United States.

Amazon’s Doraville project is a continuation of a bigger trend. More than 21 million square feet of industrial real estate projects are under construction in Atlanta, the fifth consecutive quarter activity has remained at that level, according to Colliers International.

Amazon’s demand for new warehouse space is driving much of that new development. The e-commerce giant alone leased 3.7 million square feet in the past three months.

Amazon’s total fulfillment center network has grown to at least 13 million square feet across the Atlanta region, almost doubling its size from the end of last year.

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Cushman & Wakefield Arranges $126.6M Sale of Industrial Park in Metro Atlanta

Source: REBUSINESSONLINE

NORCROSS, GA. — Cushman & Wakefield has arranged the $126.6 million sale of Gwinnett Commons, a 16-building light industrial park in Norcross. The property comprises 1.2 million square feet and is situated at 1790 Corporate Drive, 22 miles northeast of downtown Atlanta and one mile from Interstate 85. At the time of sale, the property was 97 percent leased. Gwinnett Commons also includes two development sites that can accommodate 195,000 square feet of warehouse space. Stewart Calhoun and Casey Masters of Cushman & Wakefield represented the seller, a partnership between affiliates of Westmount Realty Capital and Quilvest Capital Partners, in the transaction. Brian Linnihan and Mike Ryan of Cushman & Wakefield arranged acquisition financing on behalf of the buyer, Irvine, Calif.-based CIP Real Estate.

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PGIM Real Estate Acquires Industrial Portfolio in $425 Deal

Source: GlobeSt

On behalf of its US core real estate strategy, PGIM Real Estate has acquired a 4.7 million-square-foot, 15-building industrial portfolio valued at $425 million. The seller was Crow Holdings.

The properties, located in Atlanta, Dallas, Denver, Fort Worth, and Phoenix, are newly constructed or still under construction and are close to major thoroughfares and gateway airports. 

Four of the delivered buildings are now fully leased and two others partially leased. 

With 32- to 36-foot clear heights and functional layouts with dock doors, the properties can accommodate the drastic rise of e-commerce and last mile distribution in the US, PGIM Real Estate says, while offering space for advanced distribution operations and autonomous machinery.

These awards honor the industry’s most influential and knowledgeable real estate executives from the net lease sector.

“This transaction enabled us to capitalize on an extremely rare opportunity to acquire a large high-quality industrial portfolio that would have otherwise taken years to build or assemble,” said Frank Garcia, managing director and senior portfolio manager for PGIM Real Estate’s U.S. core strategy, in prepared remarks. 

 “This quarter, we’ve added 49 best-in-class industrial properties totaling 12.3 million square feet to our core fund, located across highly sought-after US distribution markets,” he added.

Steven Oliveira, executive director, and Kevin Interlicchio and Laura Nugent, associate vice presidents, of PGIM Real Estate’s Transactions team led the portfolio acquisition on the firm’s behalf.

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U.S. may need another 1 billion square feet of warehouse space by 2025 as e-commerce booms

Source: CNBC

With online sales proliferating during the coronavirus pandemic, the U.S. is going to need more warehouses to store hoards of boxes and handle those orders. 

Holed up at home, and with many bricks-and-mortar stores temporarily shut, shoppers have turned to their computers and smartphones to buy everything from fresh groceries to new home furnishings to pet toys. And even after the pandemic subsides, the trend of people buying more and more online is expected to stick around. 

And so with more people clicking “buy” instead of venturing to the mall, demand for industrial real estate could reach an additional 1 billion square feet by 2025, according to a new report from JLL. 

The commercial real estate services firm said that prior to the Covid-19 crisis, about 35% of its industrial leasing activity was related to e-commerce. But now, it said, as much as 50% of that leasing activity has already been tied to the online retail industry in 2020. 

“The first quarter was our largest leasing quarter in three years,” said Craig Meyer, president of JLL’s Americas industrial division. “We’re seeing more pressure on [e-commerce companies] than the typical holiday season … to meet consumer demand.” 

He explained a recent situation where a retail-related company requested a lease on a 1.2 million-square-foot warehouse space in Delaware about 30 days ago, and moved in almost immediately to begin fulfilling orders for fresh items. Part of the warehouse included a cold-storage component, for foods that need to be kept refrigerated, Meyer explained. 

“That is unheard of,” he said. “The lease was signed and they moved in in less than 30 days.” Typically, deals will span the course of nine months, from signing a lease to moving in, according to Meyer. 

JLL is projecting the U.S. needs another 100 million square feet of cold-storage facilities just to keep up with consumer demand and sales trends. 

To put into perspective how much extra warehouse space is needed, Prologis, a real estate investment trust that is also Amazon’s largest landlord, has estimated that e-commerce companies require 1.2 million square feet of distribution space for each $1 billion in sales.  

The firm eMarketer, meantime, is predicting U.S. e-commerce sales will make up about 14.5% of total retail sales, or $709.78 billion, this year. By the end of 2024 that percentage will grow to 18.1% of all retail sales, with online sales surpassing $1 trillion for the first time, it said. 

Industrial real estate is the “darling” of the commercial real estate industry today, Meyer said.

The sector certainly has a brighter outlook than some of its peers — including office, retail and hotel space, where vacancies are increasingly growing and fewer new deals are being done. 

In retail specifically, store closures are piling up and are on track to break a record this year, pressuring landlords to find new uses for emptied spaces. Rents are also under pressure, as companies looking to keep their stores open are working to renegotiate deals, hoping to leverage the market’s disarray in their favor. Former department store executive Jan Kniffen has predicted a third of America’s malls will vanish by 2021. This could also deal a blow to the towns that depend on their malls for tax purposes. 

Warehouses could be one solution, since supply is harder to come by. 

In some instances, dead malls have already been converted into sprawling logistics hubs. In Memphis, Tennessee, for instance, a shuttered Sam’s Club store is now home to a Sam’s Club e-commerce fulfillment center

Still, there are hurdles in taking a former retail space and turning it into something else, Meyer cautioned.

“There are things like zoning laws, these are residential areas,” he said. “There’s going to be a lot more involved with imagining these things.” 

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