Secondary Hubs Gain Traction as E-Commerce Beckons

AUSTIN, TX—Furniture, refrigerators, mattresses, cars─is there anything that can’t be purchased online? The challenge is that consumers still want fast shipping even for these larger sized items.

To get customers that new sofa or dining set in a matter of days rather than weeks, consumer product retailers are increasingly leasing space in secondary markets to supplement larger distribution hubs. For example, major consumer product companies have historically served Texas from Houston and the Dallas-Fort Worth metroplex.

However, these companies now need a significant presence in Austin or San Antonio to meet delivery expectations for customers in Central Texas. This is evidenced by two major furniture groups, Wayfair and Four Hands, leasing 80% of the industrial space at Southpark Commerce Center V, a 350,171-square-foot project in Austin.

The trend isn’t limited to Austin or even Texas. Many secondary markets with growing populations are posting similar growth and demand from consumer product users. In this exclusive, Ben Newell, senior vice president at Transwestern Development Company, shares insights into the growing demand for industrial space outside the major metros, the reasoning behind it, examples in Austin and how long this trend may continue.

GlobeSt.com: What’s driving increasing demand for industrial space in secondary markets?

Newell: E-commerce has continued to grow at an impressive rate. Today’s consumers make more purchases online than ever before and they expect to receive those items in one or two days. But, those online purchases are no longer limited to small household items or clothes. E-commerce has evolved to include big purchases like furniture, refrigerators, mattresses and even cars. The challenge for those consumer product companies is delivering purchases fast enough to meet their customers’ expectations. To do that, they have to locate closer to the end customer, which is increasing demand in secondary markets.

GlobeSt.com: Why are secondary markets in such high demand by consumer product companies?

Newell: Many secondary markets are seeing population growth, especially from younger residents. A younger population translates to many of the home purchases being made by first-time home buyers in need of new items to fill their homes. As residents move to secondary markets, they will need more products like everyday goods, furniture and appliances. No matter the size of the product, consumers are no longer willing to wait a week for delivery. If an appliance or furniture store says delivery will take a week or more, it will lose the sale four out of five times.

GlobeSt.com: How is this being demonstrated in Austin?

Newell: At one of our developments, Southpark Commerce Center V, 80% of the leased space was taken by two major furniture groups: Wayfair and Four Hands. The project is 350,000 square feet, so each company has taken significant space to support operations in Austin.

GlobeSt.com: Why is Austin a target market for consumer product companies?

Newell: Austin has been the fastest-growing metro in the US for the last eight years, making the logistics for consumer product companies so important. Austin has never been a regional distribution market because it’s surrounded by the Texas Distribution Triangle of Houston, Dallas and San Antonio. Major consumer product retailers have historically served Texas from Houston and the Dallas-Fort Worth metroplex. Now, however, they also need a significant presence in Austin to meet delivery expectations for customers in Central Texas.

GlobeSt.com: What other markets are experiencing growth from consumer product companies?

Newell: Many secondary markets with growing populations are seeing similar growth and demand from consumer product users, such as Charleston, SC. We have started a new project there called Charleston Logistics Center to meet the growing demand.

GlobeSt.com: Do you expect industrial growth in secondary industrial markets to continue?

Newell: Absolutely. More and more residents are choosing to live in the city they want to instead of where the best job prospects are. Many of these cities are considered secondary industrial markets.  Austin and Nashville are prime examples. As the war for talent has increased, more companies are relocating to these cities, which in turn, attracts more residents. As both the populations of secondary markets and the popularity of online shopping continue to grow, so will the industrial real estate that serves them.