“Last Mile Retail” is the latest topic buzzing through discussions of industrial real estate. It refers to the final stage of online purchasing and the travel of goods to the buyer from a distribution center. The obvious benefit is short lead-time delivery options for retailers/wholesalers to transport products to consumers at their place of business or residence.
We concur that online shopping is positively impacting industrial real estate now and will continue to have a positive impact in the future. But we aren’t rushing to build or buy the same kind of industrial assets that most are pursuing.
And if you know Westmount, you aren’t surprised. We rarely follow the crowd. It is part of Westmount’s investing DNA to anticipate future trends and look for opportunistic, off market deals that others may not recognize.
Our time-tested performance encourages us to continue to seek unique insights and adopt innovative strategies.
For instance, our alternate view of “last mile distribution” led us to an investment strategy that we have been deploying years before others started the buzz about online retail’s impact on industrial real estate.
A recent NAIOP conference in New Jersey that was reported in GlobeSt.com, Ben Conwell, Sr. with Cushman & Wakefield said, “Whoever figures out the last mile in a cost-effective and timely way wins the game. That’s the last, most intimate and critical touch with the customer.”
Westmount not only believes Conwell is correct, but we also believe we’ve figured out a distinctive approach to “last mile distribution” that sets our company apart.
Consider our strategy and see what you think.
We believe there are a finite number of users who will demand industrial facilities for same-day or next-day shipping. Certainly Amazon is a big builder of modern warehouse distribution centers around the country, but most B2C deliveries are still handled by USPS, UPS and FedEx who operate their own distribution networks.
As a result, Westmount believes that “last mile distribution” is more relevant for B2B than B2C.
From years of working in industrial real estate, we have observed that greater demand for “last mile distribution” may be driven by B2B users who prefer infill locations. Common examples include businesses that wholesale to retailers, light assembly and manufacturers, product showrooms, and small third party logistics providers. These users need to be close to business centers. The infill industrial locations they need not only reduce transportation overhead, but also provide greater access to labor. Common objections to infill industrial real estate are that older projects are functionally obsolete and land costs are prohibitive for construction of new, modern facilities. Also, many local municipalities’ approval boards have concerns about truck traffic in densely populated areas, so they prefer real estate uses other than industrial.
Westmount’s contrarian industrial strategy remedies these concerns.
For more than 25 years, we have been identifying and acquiring high potential, infill industrial locations. We have upgraded and modernized them to meet the demands of today’s B2B industrial tenants.
Westmount’s industrial strategy includes making millions in capital improvements as soon as acquisitions are closed. Typical renovations and improvements include roof replacements, upgraded truck loading docks and truck courts, modern fire suppression systems, better car parking options, and LED lighting in warehouses. To create external signals that projects have been revived, we look for opportunities for signage improvements, as well as exterior and interior painting and lighting upgrades.
In addition to capital improvements, Westmount also begins providing best-in-class property management, make-ready improvements to existing vacancies, re-branding and re-leasing programs. These sweeping changes not only maximize tenant retention, but also accelerate attraction of new tenants.
As a result of our alternate approach to industrial real estate, Westmount’s current and future industrial investments are uniquely poised to benefit from “last mile distribution” as we interpret it.