Massive distributions centers and multi-story warehouses could be the next big real estate bet as Americans fully embrace ecommerce.
And smart money is clutching at the shared economy as the impact of technology in the office drives companies to create connectivity in the workplace.
Speaking at the NAIOP New Jersey seminar “CEO Perspective on the Changing CRE Landscape,” a panel of top industry professionals debated the long-term impact of technology and other changes on the real estate landscape.
Jay Cornforth of Brookfield Property Partners noted that “open seating has been a model for 20 years, and it’s evolved into a great recruiting tool for Millennials who are comfortable working in this environment.”
Ron Lo Russo of Cushman & Wakefield, believes that technology is fueling the collaborative work style, requiring companies to think about space differently.
Workspace strategy is a huge topic on any business leader’s mind. “People can’t just email and never meet. They need face-to-face conversations to make decisions and close deals, and business is being conducted that way.”
As a result, individual workspaces are shrinking and communal space is expanding in the form of breakout rooms, gyms and cafes. “It’s happening in the residential/retail industries as well – residential development cannot take place without retail development to provide services.”
CBRE’s Gil MEdina — who moderated the panel along with Dave Gibbons of Elberon Development Group — reflected on the influence technology has had on the real estate supply chain. While ecommerce is driving retail expansion, there are fewer storefronts and greater challenges when it comes to order fulfillment and shipping.
New Jersey’s easy access to New York City – which Lo Russo called “the most ordered from zip code in the world” – makes it desirable for industrial.
However, challenges exist and infrastructure needs to be improved to provide better and faster ways to move goods.
“In the future, I believe consumers will be buying in stores and their purchases will be shipped home before they get there,” said Lo Russo. “In order to offer consumers same day service, transportation into the city is critical for New Jersey.”
“The answer is large centers for ‘last mile/last hour’ fulfillment,” said Cornforth. “This ecommerce solution is playing out worldwide, not just in New York, and real estate owners will need to invest in infill products, trailers and more.”
He predicted that tomorrow’s architects will be busy designing distribution centers as demand for racking and automation grows. “Don’t be surprised if multi-story warehouses come next. In Japan they have seven-story warehouses to meet ecommerce demands.”
Gibbons asked the panelists to address opportunities in New Jersey and how the state is a fit for their firms.
“We believe suburban office space has a place as Millennials move out of the cities to raise their families,” said Rich Gottlieb of Keystone Property Group, which has purchased a 2.3 million-square-foot portfolio in the state.
“Our programming involves building a community, not just a place to work. So we are de-commoditizing buildings with lifestyle features, inviting indoor and outdoor spaces and amenities.”
In response to Medina’s question about how suburban office campuses are meeting the challenges of outdated, often obsolete, infrastructure, Lo Russo said, “In New Jersey, the average age of the infrastructure is younger than that in New York, which continues to be a strong marketplace. Our thought process focuses on the workforce of today that expects the office to include a component of fun. The cell phone has created a mobile generation for whom home is an extension of work – so work needs to be an extension of home.”
Cornforth added that this work-play-live philosophy is epitomized by the firm’s Brookfield Place property in Battery Park, New York.
“We took tired office towers and repositioned them to serve the Battery Park Community. Now we are seeking similar infill and acquisition