Industrial is going to continue to evolve—and grow—over the next two years as the market accommodates demand from ecommerce and logistics companies. In 2020, the industrial market will have larger warehouse spaces, more ecommerce consolidation and an increased number of manufacturers moving to the Inland Empire to mitigate increasing real estate costs in Los Angeles, according to Rene Ramos, an industrial expert at Coldwell Banker Commercial. We sat down with Ramos for an exclusive interview to talk about the industrial market today and the trends that will dominate over the next two years.
GlobeSt.com: What trends do you expect to see in industrial over the next two years?
Rene Ramos: The continuing trend has been toward larger warehouses. Warehouses today are being built 120% larger than they were a decade ago. That is because many companies want to have a large fulfillment center near dense metropolitan areas. In the Inland Empire, for example, Amazon has six or seven buildings totaling 20 million square feet. That trend is going to continue, and we are going to see a lot of consolidation. This is because industrial is now a quasi-retail center. Today, a consumer's store is their laptop. They can order everything online, and in a day it is at their house. A lot of companies need warehouses spaces to service those customers, and they want to be strategically located to reach them. As a result, warehouses are going to get taller. In 2020, I believe the square footage we lost in retail is going to be gained in industrial.
GlobeSt.com: What about for smaller users?
Ramos: There is a high demand for industrial, and it has created a lack of small product for 100,000 square feet or less. I see that changing. Today, developers are focused on producing the product that is larger, but I think that development for users in need of buildings less than 100,000 square feet is going to pick up. There is no product, and prices are increasing because of the lack of supply. I believe that we will see more small-box industrial product coming to the market that will service smaller industrial users.
GlobeSt.com: Ecommerce has clearly been the dominating driver of industrial market growth in the last few years. What are the trends for manufacturing users?
Ramos: In 2010, when the economy wasn't doing well, I was doing some work in Frog Town. At that time, a lot of L.A. manufacturers were going to that area to save money. Today, manufacturers are going out even further, into the Inland Empire where they can get a building for $125 per square foot, rather than $200 per square foot that you would get in L.A. That is a trend that has been going on for many years. The cost effectiveness in the Inland Empire has attracted those businesses. It can accommodate the growth of industrial real estate and allows manufactures to do business with a lower overhead.
GlobeSt.com: As costs rise, there has become a dichotomy between warehouse users and manufacturing users. Do you think that dichotomy will grow by 2020?
Ramos: Yes. At the moment, everything is built with logistics and warehouse space in mind. That is the product that is being built. Manufacturers, as a result, have had to purchase warehouse buildings and make modifications. Developers also aren't producing properties with the amenities that a manufacturer needs because it is more cost effective. They are saving $50,000 by reducing the power needed in these developments. In my business, I do a good split between the two. I started my career working with manufacturers and I know what they are looking for; however, I would be stupid to focus on that when the hot product is warehousing and distribution.
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Kelsi Maree Borland
