Industrial Revolution – The E-Commerce Merger of Retail & Industrial

June 6, 2018 — TERRANOVA TRENDS — BY ANDREA SPEEDY Over the past five years, industrial real estate has been turning in annual returns approximately 1.3% higher than the entire real estate industry average. Typically, the historical norm for industrial properties stood at 10% annual returns on an unleveraged basis… but recent performance is now closer to 12.8%. While this has definitely caught the eye of capital markets looking to diversify investment portfolios with real estate that has been delivering above office, retail, and apartments – the shift reveals an evolution taking place in the overall commercial real estate market.

Supply and Demand

Big changes are already underway in traditional retail development – from building more immersive store environments, to innovative mixed-use properties, to adaptive re-use and re-development of under performing spaces. On the other side of the spectrum, the industrial property inventory has been unable to keep up with ravenous demand from e-commerce uses, driving up the cost of industrial space. In South Florida in particular, this supply-demand scenario is heightened by a lack of available large parcels of land suitable for new industrial development. Since 2008, residential and mixed-use has driven much of the development landscape in Miami-Dade County, with commercial properties joining the development cycle a few years later.

Changing dynamics on the demand side of the equation are also shaping a new future for industrial real estate – not least of which is the ever-increasing business related to e-commerce fulfillment. As more and more businesses look to serve digital consumers with prompt (or even same-day) delivery of everything from apparel to electronics to groceries, industrial warehousing space has become a highly sought-after commodity.

A recent Terranova joint acquisition in Doral was selected for precisely this reason. “Our new industrial property in Doral has unbeatable proximity to the Palmetto Expressway (SR-826) as well as Miami International Airport,” says Stephen Bittel, Chairman for Terranova.

CLICK HERE TO READ THE LATEST INSTALLMENT OF TERRANOVA TRENDS