The Blackstone Group is one of the largest real estate private equity firms in the world today. Its real estate portfolio includes office, retail, industrial, hotel and residential properties.
However, pay particular attention to Blackstone’s bet of nearly $19B on warehouse space.
Blackstone recently acquired roughly 1,300 properties spanning 179M square feet across nine states. Days later, Blackstone announced its plans to pool $6.8B in a new urban warehouse company in Europe. Already in with $1.8B for “last mile” warehouse space in Chicago, Dallas and Baltimore, Blackstone holds $2.6B for Canadian warehouse space and $950M for more than 100 warehouse assets in Southeastern states.
Clearly, Blackstone’s investments in “last mile” warehouse markets underscores the fact that growing numbers of people prefer shopping online rather than in stores. And, just as clearly, Blackstone’s investments are moving toward land that is cheaper and more available for warehouse space outside of heavily urban areas.
According to the global commercial brokerage firm CBRE, industrial/warehouse space across the country had an availability rate of just 7% and a vacancy rate of just 4.3% in Q1 2019. This is the lowest availability rate since Q4 2000 and the lowest vacancy rate since, at least, 2002.
Zach Aarons, co-founder of the venture capital firm Meta Prop believes, “There is a paradigm shift between how investors value warehouse and retail space…it’s all going to be one thing”
Alexander Cocoziello, managing director of capital markets and investment with Advanced Realty Investors, said, “…warehouse space has the longest runway of any real estate asset class.”
Demand for e-commerce warehouse space is strong everywhere in the country. For example,
- Detroit had the lowest availability rate for industrial and logistics space in Q1 2019 at 3.1%, according to CBRE data.
- Salt Lake City had a 4.2% availability rate.
- Milwaukee and Portland both had a 4.3% availability rate.
- Los Angeles – 4.5%
- Miami – 5.2%
- Chicago – 5.4%
- The five boroughs in New York saw 2.5M square feet of industrial space leased in 2018 with 95% of that space involving e-commerce logistics tenants, according to JLL.
According to Joel Bergstein with Lincoln Equities, warehouse space just outside the city is “…now about as solid a bet as new residential space.” In fact, Bergstein sees more multi-family investors moving into warehouse e-commerce commercial properties. “Based on the new rent regulations and laws just passed regarding multi-family properties, e-commerce warehouse space is a more attractive alternative.”
Thanks to The Real Deal’s Eddie Small for source data.