Strasmann: There will be a continued need for big-box product as the e-commerce sector expands and as occupiers of a broad industry base will continue to require quality space. Most markets are in a supply-constrained situation for high-quality, class-A space. Whether e-commerce or other types of uses, quality big box product will remain in demand while infill locations with last-mile facilities will continue to grow in densely populated areas.

Initial development started with the big-box sector because that was in greatest demand due to many company consolidations that occurred during the recession. It resulted in these companies finding a more efficient business model: take three locations and put it into one facility to operate more efficiently. As the recovery became much more broad-based, demand from corporate and private business for light industrial increased. Currently, light industrial is experiencing greater rental appreciation than big box space. It's a natural evolution of the business cycle. This goes all the way down to small incubator space.

GlobeSt.com: Will there be less demand for traditional big-box industrial in this market to accommodate this shift or will users go to other markets?

Strasmann: Given today's e-commerce business cycle and the generally strong fundamentals of the Southern California industrial market, it is highly unlikely that the demand for quality big-box space will decrease. Some key things to keep in mind include the fact that e-commerce is expanding at a healthy rate and that industrial real estate continues to be one strongest segments with high, broad-based demand from occupiers and vacancies at all-time lows. Lastly, one has to remember that densely populated areas don't have an infinite supply of land for new development. So, demand for big-box product in this region won't go away.

GlobeSt.com: What other industrial-space shifts do you foresee in Orange County as e-commerce continues to grow?

Strasmann: I foresee more and more infill locations with smaller footprints in this area. E-commerce and related occupiers are at the stage where they are using speed as true advantage with their customers. These facilities will range from 20,000 square feet to 100,000 square feet.

GlobeSt.com: What else should our readers take away from your report?

Strasmann: It's important to understand that this industry is going through enormous growth and an evolution. The business model is changing in multiple ways, and it will continue to do so. Overall, we should set our sights on implementing last-mile facilities in densely populated infill areas. Southern California is a perfect canvas for that.

|

NEWPORT BEACH, CA—As the economic recovery became much broader based, demand from corporate and private business for light industrial increased, and light industrial is experiencing greater rental appreciation than big-box space, CBRE senior managing director Kurt Strasmann tells GlobeSt.com. According to a recent report from the firm, due to changes in consumer expectations and strong demographics, companies have had to adjust their supply chain accordingly.

The report also states that a huge benefit to the transition to an e-commerce augmented logistics model are the numerous prominent express-shipping hubs throughout the Greater Los Angeles/Orange County/Inland Empire region that move goods purchased on line to the consumers relatively easily. In addition, the impact of e-commerce and last-mile delivery on the region is evident: big-box industrial space, which has been the most in-demand space type during the current cycle, will slowly cede to light-industrial buildings as the need for last-mile facilities increases.

We spoke with Strasmann about the shift to light-industrial and other industrial shifts he foresees for the Orange County market as e-commerce continues to grow.

GlobeSt.com: How will big-box industrial space change as the demand for last-mile facilities increases?

Strasmann: There will be a continued need for big-box product as the e-commerce sector expands and as occupiers of a broad industry base will continue to require quality space. Most markets are in a supply-constrained situation for high-quality, class-A space. Whether e-commerce or other types of uses, quality big box product will remain in demand while infill locations with last-mile facilities will continue to grow in densely populated areas.

Initial development started with the big-box sector because that was in greatest demand due to many company consolidations that occurred during the recession. It resulted in these companies finding a more efficient business model: take three locations and put it into one facility to operate more efficiently. As the recovery became much more broad-based, demand from corporate and private business for light industrial increased. Currently, light industrial is experiencing greater rental appreciation than big box space. It's a natural evolution of the business cycle. This goes all the way down to small incubator space.

GlobeSt.com: Will there be less demand for traditional big-box industrial in this market to accommodate this shift or will users go to other markets?

Strasmann: Given today's e-commerce business cycle and the generally strong fundamentals of the Southern California industrial market, it is highly unlikely that the demand for quality big-box space will decrease. Some key things to keep in mind include the fact that e-commerce is expanding at a healthy rate and that industrial real estate continues to be one strongest segments with high, broad-based demand from occupiers and vacancies at all-time lows. Lastly, one has to remember that densely populated areas don't have an infinite supply of land for new development. So, demand for big-box product in this region won't go away.

GlobeSt.com: What other industrial-space shifts do you foresee in Orange County as e-commerce continues to grow?

Strasmann: I foresee more and more infill locations with smaller footprints in this area. E-commerce and related occupiers are at the stage where they are using speed as true advantage with their customers. These facilities will range from 20,000 square feet to 100,000 square feet.

GlobeSt.com: What else should our readers take away from your report?

Strasmann: It's important to understand that this industry is going through enormous growth and an evolution. The business model is changing in multiple ways, and it will continue to do so. Overall, we should set our sights on implementing last-mile facilities in densely populated infill areas. Southern California is a perfect canvas for that.