GlobeSt.com: What factors are driving multi-tenant industrial investors into secondary and tertiary markets like Salt Lake City?

Brutten: The biggest driver is the growth of e-commerce, which creates a desire to get goods closer in proximity to the end users. The closer you are, the lower your transportation expenses and better your service (e.g., one day versus two days). The next biggest driver is freight costs. As the cost of trucking goes up (despite flat/down oil prices), the greater the desire to have more smaller spaces versus fewer larger ones. There is also a demand for smaller industrial boxes that are located close to the center of the population, as these smaller boxes serve the market with essential space for goods and services not covered by the larger, big-box buildings.

GlobeSt.com: What effect will this have on these secondary and tertiary markets and, as a result, on multi-tenant industrial properties in the primary markets?

Brutten: Vacancy rates for industrial properties are at all-time lows. E-commerce demand has been a huge driver of industrial demand. For large “big box” requirements (500,000 square feet or larger), according to JLL research, we equate 40% of the demand to e-commerce-related projects. Those e-commerce facilities require as much as five to 10 times the amount of labor for the same footprint as a traditional distribution centers. Labor availability and rates are one of the biggest drivers of industrial real estate project site selection today.

GlobeSt.com: With decreasing concern about distance between warehousing/manufacturing and delivery now that driverless trucks are on the horizon, how will CRE be impacted?

Brutten: Although the technology related to driverless vehicles is real and works today for cars and trucks, the legal and social implications related to making autonomous trucks a supply-chain reality with any scale is seven to 10 years out. Distribution/warehousing in and of itself is evolving for reasons stated above. When manufacturing is involved, then it will almost always be more efficient and effective to locate distribution as close to the plant as possible.

GlobeSt.com: What else should our readers know about the driverless-truck phenomenon?

Brutten: Technology is real and works, but don't expect to see a “driverless” truck passing you on the highway anytime soon.

SAN DIEGO—The biggest driver for markets like Salt Lake City is the growth of e-commerce, which creates a desire to get goods closer in proximity to the end users as well as to the center of the population, Westcore Properties' founder and chairman Marc Brutten tells GlobeSt.com. An active investor in industrial and office properties throughout the Western US, Westcore recently acquired an 87,122-square-foot industrial property in Salt Lake City from Los Angeles-based BH Properties for approximately $7.15 million, marking Westcore's entry into the Salt Lake City marketplace.

Located at 4745 Amelia Earhart Dr., the one-story industrial building with cold storage is 100% occupied by Criminelli Fine Meats and GE Healthcare.

Brutten says the hot industrial market (especially multi-tenant industrial) is driving investors and industrial users into secondary and even tertiary markets like Salt Lake City. As a side note, the industrial sector may be becoming less concerned about distance between warehousing/manufacturing and delivery now that driverless trucks are on the horizon and will extend the hours in a day that those trucks are allowed to drive—with no drivers who need breaks. This opens up possibilities even further for industrial users in secondary and tertiary markets.

We spoke with Brutten about the factors driving multi-tenant industrial investors to secondary and tertiary markets and how driverless trucks fit into the picture.

GlobeSt.com: What factors are driving multi-tenant industrial investors into secondary and tertiary markets like Salt Lake City?

Brutten: The biggest driver is the growth of e-commerce, which creates a desire to get goods closer in proximity to the end users. The closer you are, the lower your transportation expenses and better your service (e.g., one day versus two days). The next biggest driver is freight costs. As the cost of trucking goes up (despite flat/down oil prices), the greater the desire to have more smaller spaces versus fewer larger ones. There is also a demand for smaller industrial boxes that are located close to the center of the population, as these smaller boxes serve the market with essential space for goods and services not covered by the larger, big-box buildings.

GlobeSt.com: What effect will this have on these secondary and tertiary markets and, as a result, on multi-tenant industrial properties in the primary markets?

Brutten: Vacancy rates for industrial properties are at all-time lows. E-commerce demand has been a huge driver of industrial demand. For large “big box” requirements (500,000 square feet or larger), according to JLL research, we equate 40% of the demand to e-commerce-related projects. Those e-commerce facilities require as much as five to 10 times the amount of labor for the same footprint as a traditional distribution centers. Labor availability and rates are one of the biggest drivers of industrial real estate project site selection today.

GlobeSt.com: With decreasing concern about distance between warehousing/manufacturing and delivery now that driverless trucks are on the horizon, how will CRE be impacted?

Brutten: Although the technology related to driverless vehicles is real and works today for cars and trucks, the legal and social implications related to making autonomous trucks a supply-chain reality with any scale is seven to 10 years out. Distribution/warehousing in and of itself is evolving for reasons stated above. When manufacturing is involved, then it will almost always be more efficient and effective to locate distribution as close to the plant as possible.

GlobeSt.com: What else should our readers know about the driverless-truck phenomenon?

Brutten: Technology is real and works, but don't expect to see a “driverless” truck passing you on the highway anytime soon.