Episode 5


The sleeping giants of industrial land.


“...the reality is the industrial and logistics asset class has been on an amazing run the past few years. You speak to anyone who’s been in the industry, regardless quite frankly, of their career length and they’ll probably tell you they have never seen an acceleration like the current environment.”

Jeff Miller, Vice President, Industrial, Oxford Properties Group

"The industrial and logistics asset class has been on an amazing run the past few years."

In this episode

Highways, freeways, and country roads around the world are dotted with them, but few people have ever paid attention to them or been inside of them. The warehouse is one of the titans of our world, but few people have been inside of them with even fewer who understand their place and function in our everyday lives. In this episode of Changing Places, we’re throwing open the doors of the warehouses...the real sleeping giants of our world.

Join host Mariam Sobh as she unpacks the latest supply chain and warehouse trends with Oxford Properties’ Head of Industrial practice Jeff Miller, and Avison Young’s Principal, Practice Leader for Industrial Capital Markets Erik Foster.


  • 4:50 Jeff Miller discusses the efficacy of the supply chain.
  • 21:03 Erik Foster discusses the huge demand from investors in the warehouse sector.
  • 24:52 Erik Foster discusses how entire warehouses are automated and no one is the wiser.

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Click here to expand transcript

Speaker 1 [00:00:06] Would you welcome a 24-hour warehouse in this area?

Speaker 2 [00:00:10] It wouldn't bother me. The traffic's horrible here as it is. So a little more traffic ain't gonna make any difference.

Speaker 3 [00:00:16] I think I pretty much got them over here already. They're already in the area.

Speaker 4 [00:00:21] I don't know about 24 hours. But yeah, there's enough warehouses around here working.

Speaker 5 [00:00:26] Why need a 24 hour warehouse?

Speaker 1 [00:00:28] So let's say it's like a, it's like an online store or online company open to do 24-hour warehouse. So I mean, like, let's say it's right here on this corner.

Speaker 6 [00:00:37] No.

Speaker 1 [00:00:38] Why is that?

Speaker 6 [00:00:39] Warehouses are long gone, hidden away.

Speaker 1 [00:00:42] Why?

Speaker 6 [00:00:43] Why? They're ugly.

Speaker 7 [00:00:46] But I think we probably have some already in Torrance, and Wilmington.

Speaker 1 [00:00:50] Do you think it's a good thing or a bad thing?

Speaker 7 [00:00:52] Well, depends what kind of business it is. I mean, how controlled it is. Is it Amazon? Is it Walmart? Is it– who is it.

Speaker 1 [00:00:59] Let's say it was one of those two.

Speaker 7 [00:01:01] Okay. I have a friend who's a coordinator for Amazon. They're in Torrance, so I know he's 24 hours. So I don't see why it wouldn't work here. But I'm not a business person.

Mariam Sobh [00:01:13] Welcome to Changing Places, brought to you by Avison Young. In Changing Places, we explore our continuing and complex relationships with the built world around us. I'm your host, Miriam Sobh. We've all been there, you're on the road to somewhere as the great gray expanse of a freeway stretches before you into eternity. You look out the windows, lost in thought as you begin to notice one warehouse after another after another. Before you know it, you've reached your destination, the warehouses is a distant forgotten memory. Or are they? Chances are the clothes you're wearing, the phone in your pocket. and the toaster on your counter came through one of those warehouses at some point in their lifecycle. While the warehouse may seem like a hulking mass without any relevance to your life, it's one of the most important aspects of your life you never knew existed. Let's learn a little more about the industry. The warehouse sector is brimming with life. It's nearly a half trillion dollar global market. Long Point Realty partners recently raised $669 million to invest in U.S. warehouses near urban centers, far surpassing their $450 million goal. DH Property Holdings has a three-story development in Brooklyn, while they're co developing an 18-acre multi-story distribution center which is near completion. Toronto, Vancouver, San Francisco, and Washington DC are among the cities planning to build multi story warehouses. Not all warehouses are welcome in some cities and towns. A proposed 24/7 1.1 million square-foot warehouse in West Hanover Township, Pennsylvania, with 200 loading docks and a 500 car parking lot has local residents up in arms. Meantime, warehouse vacancies in and around US ports are at 3.6% or effectively zero, according to CBRE. The same analysis finds the warehouses in the Port of Los Angeles have record low vacancy of 1%, the lowest ever recorded by CBRE. In this episode of Changing Places we're going to explore what happens when a sector is pushed to the brink. Innovation is the word of the day and an industry evolves to meet the varied needs and interests of every stakeholder across the value and supply chain. Our guests are Jeff Miller, head of Industrial Properties at Oxford Properties and Erik Foster, Principal Practice Leader Industrial Capital Markets at Avison Young. They'll take us through the warehouse industry and offer us their insights, expertise, and what they're seeing on the ground, and in the years ahead. We'll begin with Jeff Miller. Welcome to Changing Places, Jeff. I want to begin by getting your point of view on how the current state of warehouse and industrial land stands right now?

Jeff Miller [00:03:57] You know, the reality is the industrial and logistics asset class has been on an amazing run the past few years. You speak to anyone who's been in the industry, regardless, quite frankly, of their career length, and they'll probably tell you they have never seen an acceleration like the current environment. And when we speak to folks around the globe in every major market, we hear the same thing – rental rates and urban higher demands never been so strong. Overall, it has been a great time to be in our sector

Mariam Sobh [00:04:29] With regards to the global supply chain as the world begins to reopen and there's still some congested ports, we have good sitting in warehouses and containers for long periods of time and the supply chain continues to sort itself out. As this is all happening, what have you seen with regard to the way warehouses and their owners are adapting to the moment and what the future looks like?

Jeff Miller [00:04:48] Yeah, great question. And you're correct. I mean, supply chains are a big issue. And if you look at the last couple of decades, the world almost got too efficient and supply chains really were lengthened out and complex. And now they're kind of broken. I think the way owners have responded is really to try and supply new warehouse space in key trade markets. So, your ports of entry, your coastal markets, but also trying to locate those facilities closer to the population, which is becoming more and more important, with expectations on quick delivery times. And, you know, this is all easier said than done. Because finding land in those areas, both at a coastal market or close to a population base is tough to do. And when you know, when you look at how is this going to work itself out, one of the real issues that is going to take some time is labor. Accessing labor is a huge issue right now for the industry. And obviously this is not special just to our industry, but but many others as well.

Mariam Sobh [00:05:53] I'd like to get your take on multi-story warehouses. I know Oxford Properties is behind the 700,000+ square-foot two-story warehouse Riverbend Business Park in Vancouver, British Columbia. Can you tell us more about it? And what you think it signals to the warehousing industry?

Jeff Miller [00:06:08] Yeah, sure. Yeah, we're pretty excited at Oxford for, you know, delivering the first large scale multilevel in in Canada. You know, these multi-level warehouses have been around in Asia for a couple of decades now, and have finally made their way to North American markets. We're seeing a lack of available land in dense markets, the price of land has really accelerated. And lease rates have followed suit. So finally, you know, it justifies building these in select markets. As far as what it signals, first, it's actually really refreshing, you know, to see the development community get more creative for industrial development. Typically, we've got four walls in the shape of a rectangle. And so these buildings are complicated. So I do, you know – and we should give credit to the industry for getting a little bit more creative. I think densifying these industrial developments is a good thing, versus your typical, you know, greenfield site. It's a more efficient use of land, and quite frankly, better for the environment, compared to converting, you know, the next farmer's field for a warehouse, it really does support the increased demand to have products and inventory close to where people live, because I think that's where you're going to see these multi level warehouses built

Mariam Sobh [00:07:33] Considering how long it takes to build a warehouse or retrofit one so it meets commercial, local, and industry standards, do you think multi-story warehouses will become the norm in a decade? Or is this more case by case based on the needs of a big logistics firm or retailer? Yeah,

Jeff Miller [00:07:48] I'm not sure if it'll become the norm. However, the pace of multi-story will definitely pick up particularly in your large, dense ,and expensive markets. So, you're seeing the first ones of this kind being built in markets like Vancouver, Seattle, the boroughs of New York have several of these facilities underway. And they're all in places where you virtually have no land available. And there's really, really high barriers to entry. So, it'll probably be more on a case-by-case basis, but the likely driver will be the price of land, and also the ability to achieve the rental rates that, that justify the extra cost of going vertical.

Mariam Sobh [00:08:33] And well, before we wrap up, Jeff, are there any trends you're seeing in the warehouse space over the next few years? I know there's a lot of change happening, but are there any trends you see emerging for better or worse?

Jeff Miller [00:08:43] Yeah, and I think the one we've talked about a couple times – the ongoing adoption of e-commerce – there's going to be a continued need to locate goods closer to the population base. And this might be in smaller centers, either calling them micro-fulfillment centers. But I also think it's going to involve the ongoing integration of, or blending of industrial and traditional retail to address how consumers buy, consume, and also return their goods. So the utilization of store networks, as part of the overall supply chain, I think is going to continue to to blend over the next few years. I think at a building level without getting into too many physical characteristics, we are going to see more infrastructure like power and connectivity for increased robotics and things like electric vehicles and fleets that are, we are definitely at the doorstep of and that will certainly continue to gain momentum.

Mariam Sobh [00:09:47] And when it comes to micro-fulfillment centers, are they pop-up types of warehouses or they're there for like a permanent structure, sort of in a more urban area?

Jeff Miller [00:09:57] I'd say they're gaining momentum. They are permanent, for the most part. They are smaller in footprint and format. And really what they are intended to serve is high volume and being close to the population on quick delivery. So for instance, some very large retailers that may have a 100,000 square-foot retail store are actually implementing these micro fulfillment centers in the back of a traditional retail store to kind of turn through their high volume goods.

Mariam Sobh [00:10:30] Are the occupants of multi-story warehouses varied or is it a few big multinational players that are part of it? And who benefits and uses these multi story warehouses?

Jeff Miller [00:10:41] I mean, today, in North America, there's only been a couple delivered. And for the most part, they have been occupied by your very large e-commerce retailers or traditional retailers. So there's not a lot of case study on them yet. When we approached the design of our multi-story, it was no different than any other building we develop. We had flexibility in mind. So we could have, in fact, split the building up into, you know, up to five, six customers. I t turns out, we may end up having one customer in the building. So today, it really is your larger retailers, whether it's e-commerce or traditional, that have looked at these facilities.

Mariam Sobh [00:11:23] Will multi-story warehouses follow wherever a big multinational lands, for example, Amazon moving into the DC area?

Jeff Miller [00:11:30] Yeah, and that particular group has, you know, I'd say their own dedicated program. These facilities – again, I go back to what what are the, what's the criteria for where these are going to be built. And I think it's going to have more to do with the dense population base, the expense of land, and in markets that have a super high barrier to entry. So you think about these being built in, you know, the Bronx or Queens. I mean, you cannot source land to build in traditional industrial facilities. So it just makes a lot of sense to densify. And with industrial logistics, we often, you know, construct and develop the buildings prior to a tenant commitment. So I think I think that will continue, even with the multi-level. So it's going to be driven by more the geography and the barriers to entry than a particular tenant.

Mariam Sobh [00:12:25] So you build the buildings before there's a tenant? That's, that seems kind of risky,

Jeff Miller [00:12:29] It is very typical for the industry. You can construct an industrial building in a very short period of time. So you're able to make that decision with a pretty good window on when you're going to finish, which is different than some other asset classes, like building a 50-story office tower.

Mariam Sobh [00:12:48] Well, thank you so much, Jeff. It's been a pleasure to speak with you.

Speaker 8 [00:12:55] I don't know. You know, because then you have to think about traffic and we have traffic issues. So if, if there were infrastructure that came with it, sure.

Speaker 1 [00:13:04] Do you have traffic issues because of the port or–

Speaker 8 [00:13:08] We have traffic issues because we're growing as a town. And you know, our roads aren't real wide. We don't have a lot of parking. We don't have a lot of public transportation that gets this far. They usually cut it off at a certain point. So as we're growing, we really need the infrastructure down here to to support the growth.

Erik Foster [00:13:30] I would not welcome that. I think it would really increase the noise level and the amount of trucks coming in and out. And it's already pretty noisy here. As a resident, we kind of want to keep it quiet, like like it is this morning.

Mariam Sobh [00:13:43] After hearing all of that, what do you think about warehouses now? Are they still big structures that blend into the background? Or are you curious to know more about how they're run? Maybe even hoping to snag a tour? Or would you rather pretend you've never heard about the supply chain ports or warehouses and just get that beautiful cashmere sweater at the mall when you decide you want it? We're going to dive into all these questions and more so stick around for the next portion of the show. I'll be speaking with Erik Foster, Principal Practice Leader Industrial Capital Markets at Avison Young. With more than 20 years of experience and $4 billion in transactions, Erik has built a strong track record in the industrial, healthcare, and office property sectors. He's going to guide us on the next leg of our journey with a bird's eye view on the warehouse sector. And just a reminder, Changing Places is a podcast brought to you by Avison Young that continues to explore and question our complex relationship with the built world around us. I'm your host Miriam Sobh. I hope you're liking the show so far. Don't forget to follow so you don't miss an episode and share us with your friends. We're about to meet Erik Foster, Principal Practice Leader Industrial Capital Markets at Avison Young. But before we speak to Erik, I want you to take a listen to this.

Speaker 1 [00:15:01] Would you be interested in having a warehouse built closer to the ports or to the residential neighborhoods?

Speaker 9 [00:15:07] Well, obviously you prefer it, you know, at the ports.

Speaker 10 [00:15:10] I, I don't know. You know? More warehouses.

Speaker 11 [00:15:16] Probably closer to the ports.

Speaker 1 [00:15:18] Why is that?

Speaker 11 [00:15:19] I think keep the residences and keep the port sort of the business corridor.

Speaker 12 [00:15:25] Neither. But if I had to pick one, I would say closer to the ports because the residential areas are already pretty busy with with the car and truck traffic. And I don't think we would need to increase that at all.

Speaker 13 [00:15:37] Ports obviously.

Speaker 11 [00:15:39] Why is that?

Speaker 13 [00:15:40] Well, I mean, it's– A, I think it's easier for the transportation to go from the containers. And then from there, they can be transported to go from the boat to the transport and into another place. It just increases the cost, I would think.

Mariam Sobh [00:15:58] Erik Foster, welcome to Changing Places. Erik, can you tell us what you're seeing as the warehouse industry manages one of the biggest upsets to the sector in decades, mostly due to the pandemic? And I mean, I can imagine there's a need for space as e-commerce dominates against traditional retail, but finding and identifying new space takes time. So, tell us what you've been seeing and hearing.

Erik Foster [00:16:19] So, my focus happens to be from a perspective of the investor. But the folks that are owning the real estate, and the folks that are buying these kinds of facilities, there was demand from tenants for more space because they're utilizing more facilities, they're pushing more goods and services through through these facilities. The lead times for construction of new facilities is the longest it's ever been in my career. And so it's sometimes even get sort of steel and concrete, we're hearing that the lead times have doubled and tripled. And so what that's doing is it's putting even more pressure on on tenants and, and how they utilize space because if they need more, they're playing with people who want to help them have more space and build new buildings for them. But getting those new buildings built is taking much longer than it ever has.

Mariam Sobh [00:17:13] From your experience, who are the main players in warehousing that we may not even think about or consider when we talk about warehousing?

Erik Foster [00:17:22] Well, I think when you're, when you when you drive down the road and you see these, these big tractor trailers with, you know, FedEx and things like that, on the sides of them, and UPS and, and all those sorts of players, they're they're doing a lot of the, a lot of the work delivering these goods to people through these through this demand. And Amazon has, has a number of, you know, sort of subcontractors that occupy a number of spaces, or people that have their own distribution company yet, yet use a third party like FedEx, or UPS, or Amazon, to help them with their daily business. So sometimes, you know, it's a local, it's a very hyper-local distribution business or a small manufacturer that's inexorably linked to one of the larger sort of known names out there. So I think this affects every aspect of the industrial space. And it's, it's even, you know, as we talk about distribution, some people try to, try to break this up into distribution and then manufacturing. You know, the manufacturing has an element of distribution. And as many, as we're, as things are being made here, or, you know, abroad, they still have to be shipped somewhere once they're made. And they stil;– and they have to utilize some sort of distribution network. So I think it's– the the whole warehouse industrial sector is being is being pushed right now,

Mariam Sobh [00:18:47] When it comes to these main players, who are they being led by? Like, would you say it's Fortune 500 companies, investors, the main players in the warehousing industry? You know, what, what is pushing that? Well, who was behind the scenes, I guess?

Erik Foster [00:19:00] You know, there are, there are very significant regional local players that are family-owned businesses and sometimes startups that are being run by people in your, in your neighborhoods. And then there are the big, massive public companies. So I think of, of the– there's household names. But there's also– it's the, it's the small regional businesses that probably make up the bulk of this, that are having the toughest time with it because they probably have the limited resources and, and limited experience to work through some of these challenges.

Mariam Sobh [00:19:28] That's interesting. I think we don't always think about smaller businesses, because when I think of a warehouse, I think of just some big mammoth company. And I'm gonna assume that it's hitting those smaller businesses a lot harder because they are not of the same caliber with all the resources.

Erik Foster [00:19:42] Yeah, it is. And it hits everybody in many respects, and it's – but it's also you know, you think it was just a warehouse and you know, you you see– visually in your mind, may picture a guy driving a forklift or a truck moving away from, from a dock. Sometimes it's the food business, right? Sometimes it's groceries and there's or it's food production, right? And the distribution of that is being affected in many respects by, by the challenges that we're seeing and hearing about in the warehouse business.

Mariam Sobh [00:20:12] With all that's been going on and sort of the disruption to the pandemic, what does the future of warehouses look like? Do you see that there's going to be continued growth? I mean, because it seems like everything's kind of stalled right now, due to some of the supply chain issues.

Erik Foster [00:20:25] Yeah. So um, and I'll and I'll lean a little bit more on my capital markets focus. When investors – and these are larger pension funds and larger institutional investors – look to invest into the real estate space, they typically will allocate funds to different asset classes of real estate, multifamily, and apartments and office and industrial and retail. And for the most part, industrial, historically, has always been one of those just sort of steady state investment alternatives that people put a little bit of money into as they, as they allocate funds throughout real estate. Well, the pandemic has only grown the trend of investing more into industrial. I have never seen more investment activity and demand activity from investors trying to put money to work in the industrial asset class at any point in time in my career. I don't think that's going to stop. I think that there will be continued pressure and I don't know that my crystal ball is greater than 12 to 24 months, but I think in the next, you know, in that period of time, I think this is a sort of a sustained investor momentum that's going to continue. I think investors are trying to get in because they see this, this growing world and this growing platform of assets and development opportunities that's going to be sustained here for the near term.

Mariam Sobh [00:21:52] Would you say that we're gonna see more growth in big urban markets or somewhere in the middle of the country? Is there a specific areas that you're seeing that growth happening already? Or is this just something that it just depends on, I guess the ebb and flow of the communities?

Erik Foster [00:22:08] Yeah, I think it's, I think it's more the latter than the former to your question. I do believe that there are a lot of companies that are rethinking their logistics nodes. So in other words, do we need to have five facilities throughout the US? Do we need to have– instead of five large facilities? Do we want to have 15, smaller facilities? I think those conversations are ongoing. The one thing that, that I do think that people are reacting to is population growth, where people are moving to. If there's more population, you probably have to have those goods closer to those folks or be able to distribute closer to those folks. I think that those communities and states that have higher population growth are going to be the ones that are, that are going to see more industrial asset growth.

Mariam Sobh [00:22:55] That's really fascinating, just to see how that impacts things. And what I'm wondering also is our warehouses a better, viable option versus a port, for example, for keeping things because there's more land, there's more area to contain things and build things, or is that just a simplistic view?

Erik Foster [00:23:13] Let's back up a little bit to your question earlier, because when you think about population growth in areas, there are certain markets that are now experiencing traffic difficulties because there's a lot of people roads where– you know, you just can't add two lanes to a road within a 12 month period. So the congestion around some of these markets, it's putting a strain on some of these areas. To your question about ports and things like that, the intermodal business, which is these large facilities within the country that are not close to the ports, I think those will continue to grow and get more busy as things are coming in from the coasts on rail. The port markets are definitely a focus of investors and also of users because of their growth potential. What's happening in, you know, in the west coast, people are kind of scratching their head saying, 'Is there a better way to do this? Can we ship this east? Or do we still need to bring it in from LA, put it on a train and then send it to Chicago to be distributed throughout the East?' And things like this. So I think all of those things are being reconsidered as I said earlier. But because of the the imports that we are doing, ports are certainly becoming much more industrial-centric and they've got a lot of investor and user interest.

Mariam Sobh [00:24:29] Is there anything that you're looking forward to or that excites you about this industry? looking forward or looking ahead?

Erik Foster [00:24:36] Yeah, I think there's so many cool things going on inside of these boxes that we build. And a lot of folks– and Amazon's one of them– that are others that are building multi-story robotic facilities that are distribution ficilities. So sometimes when you drive by on the highway and you think, 'Wow, there's this big massive warehouse over there,' it's just, you think it's– there's guys in forklifts moving stuff around. It may not be. It could be fully automated. And I think that there's also a point in time where we start to see how costs of going more vertical, right, utilizing vertical space more efficiently, as opposed to just trying to gather more acreage and going laterally and just find the farm next door and expanding the building, right? So I think those are going to be really, really cool to see how those those trends evolve. I'm excited to see that there's a lot of different sort of investment activity coming into the space as well because I do think it's for the long term going to be a very, very good place to invest.

Mariam Sobh [00:25:41] I'd like to thank Jeff Miller and Erik Foster for taking the time to guide us through the exciting and quite dynamic world of warehouses. The next time I see one on the freeway, I'll probably think about it more in depth and try to understand what went into this structure and what exactly is going on inside. In our next episode. we're going into the shopping mall. Are malls dead or have the rumors of their demise been greatly exaggerated? I don't want to give anything away, but I think the answer may– no, it will surprise you. I'm Miriam Sobh and this is Changing Places brought to you by Avison Young. See places changing and evolving in your neighborhood? Share your evolving spaces with us on social media using the hashtag #changingplacespodcast. I'm Mariam Sobh and this is Changing Places. Changing Places is brought to you by Avison Young. Our producer is Andrew Pemberton-Fowler. Our sound engineer is Patrick Emile. our production assistant is Gabriella Mrozowski. Additional production support is provided by JAR Audio.

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