Dear Two New Kids,

I concur with you and your brother's conclusion that purchasing industrial products may be the way to go. Currently, the type of industrial space with the fastest growing demand is fulfillment spaces of differing types. These include very large, highly automated fulfillment centers that process and ship goods to consumers. An example is the recently announced $1.4 billion air hub Amazon is planning to build in Hebron, KY, near the Cincinnati/Northern Kentucky airport. The kind of logistical systems pioneered by Amazon to provide very fast delivery also include smaller fulfillment centers located in populous urban centers. Often called “last mile” fulfillment centers, they absorb the higher cost of urban land and vertical structures as the price to be paid for a link within a system aimed at achieving the even faster delivery that Amazon provides in pursuit of its goal of “selling everything to everybody.”

Other online and traditional brick and mortar retailers realize that to survive, they must create and operate similar logistical systems. Retailers like Nordstrom are working hard to meet or beat Amazon's inventory/delivery system as they compete for shoppers, both in their traditional and online stores. Nordstrom has just announced the construction of their third large fulfillment center, a 672,000-square-foot center to be built in Elizabeth, PA.

But not all chains can afford to provide their own fulfillment center. This is the reason that there will be growing demand for third party logistics (3PL). Only the Amazons and Walmarts have their own close-in industrial space, and their competitors will need to use 3PL in order to remain competitive. For all but high end retailers and food service retailers, access to a delivery system has become a matter of “sink or swim.” Their fight for survival creates a large market for high ceiling, often multi-story, transportation accessible logistic support facilities.

To sum up, the primary reason there has been a growing demand for industrial warehouse space is due to the fact that in-store retailing continues its decline. Some experts have estimated that 50 percent of all suburban malls will close by 2030. As increasing percentages of purchases are made on the internet, there is increasing demand for closer-in infill locations, as well as the ongoing demand for fast delivery.

SAN FRANCISCO—Wouldn't it be convenient if someone had clear, intelligent answers to most of your CRE-related questions? Problem solved. Nina J. Gruen, a.k.a. Ms. Real Estate, a.k.a. the principal sociologist overseeing market research and analysis at Gruen Gruen + Associates, is here to answer readers' questions.

Dear Ms. Real Estate,

My brother and I have decided to invest in industrial properties, as we believe they have the best short and long run opportunities. We have no industrial properties in our portfolio, however, and no direct experience with real estate in that sector. Therefore, we'd like your opinion on if this is a good investment. If so, what type of industrial space should we be concentrating on?

—Two New Kids on the Industrial Block

Dear Two New Kids,

I concur with you and your brother's conclusion that purchasing industrial products may be the way to go. Currently, the type of industrial space with the fastest growing demand is fulfillment spaces of differing types. These include very large, highly automated fulfillment centers that process and ship goods to consumers. An example is the recently announced $1.4 billion air hub Amazon is planning to build in Hebron, KY, near the Cincinnati/Northern Kentucky airport. The kind of logistical systems pioneered by Amazon to provide very fast delivery also include smaller fulfillment centers located in populous urban centers. Often called “last mile” fulfillment centers, they absorb the higher cost of urban land and vertical structures as the price to be paid for a link within a system aimed at achieving the even faster delivery that Amazon provides in pursuit of its goal of “selling everything to everybody.”

Other online and traditional brick and mortar retailers realize that to survive, they must create and operate similar logistical systems. Retailers like Nordstrom are working hard to meet or beat Amazon's inventory/delivery system as they compete for shoppers, both in their traditional and online stores. Nordstrom has just announced the construction of their third large fulfillment center, a 672,000-square-foot center to be built in Elizabeth, PA.

But not all chains can afford to provide their own fulfillment center. This is the reason that there will be growing demand for third party logistics (3PL). Only the Amazons and Walmarts have their own close-in industrial space, and their competitors will need to use 3PL in order to remain competitive. For all but high end retailers and food service retailers, access to a delivery system has become a matter of “sink or swim.” Their fight for survival creates a large market for high ceiling, often multi-story, transportation accessible logistic support facilities.

To sum up, the primary reason there has been a growing demand for industrial warehouse space is due to the fact that in-store retailing continues its decline. Some experts have estimated that 50 percent of all suburban malls will close by 2030. As increasing percentages of purchases are made on the internet, there is increasing demand for closer-in infill locations, as well as the ongoing demand for fast delivery.