There’s no doubt the growth of online shopping over the years has become more commonplace. But, with the onset of COVID-19, the need for online shipping and delivery dramatically accelerated its growth and the warehousing needs that accompany that growth.

While the ease of getting groceries and goods delivered right to your door is good for consumers, the supply chain is still struggling to keep up. Today’s consumers now demand fast and easy shipping; it’s no longer something that’s just nice to have.

With eCommerce now driving real estate across the country, it provides commercial real estate investors with a significant opportunity. Companies and investors are looking for warehousing space for last-mile industrial storage and distribution.

Here’s the outlook on this trend in Southern California.

Logistics of the Last Mile

Within the logistics and supply chain industry, the last mile is the final step in the process, from the distribution center to a consumer’s door. As faster shipping has become a priority, closing the distance between the local or regional distribution center and consumers is increasingly important.

Retailers and eCommerce brands, including the biggest names such as Amazon and Alibaba, are also taking it upon themselves to look into closing the gap, buying up warehouses and distribution centers. Mega brands building their own delivery and shipping networks to meet fast delivery promises are driving other brands to try and keep up.

Another factor that matters in Southern California is its position as an entryway for overseas shipping ports. Already, that puts the need for warehouses and distribution centers at a higher level compared to some other parts of the country. In an area that has scarce warehouse spacing, the need for more is hitting a tipping point. For example, in the Inland Empire, available warehouse capacity at the end of the third quarter of 2021 was less than 1%.

Warehousing Scarcity Breeds Opportunity

When it comes to investors looking for potential opportunities, warehousing is seeing a lot of growth. According to Bloomberg, the pricing of industrial spaces outpaced both office and residential in 2021. And there are reports of warehouse rent being up nearly 30% in some markets.

When it comes to warehouses, developers can’t build fast enough. Due to the snarls in the current supply chain, many brands are also looking to stock up and keep more inventory on hand than they did in the past. This, too, increases the need for more warehouse and storage space.

Due to land scarcity in some areas, investors are also looking to unconventional distribution centers, including abandoned stores and shopping malls. With plenty of parking, prime location, and loading docks in place, these seem like the next logical option. Amazon is already buying up millions of square feet of space across the country. However, depending on local zoning and ordinances, approval may be needed to convert these empty spaces to distribution or fulfillment centers.

Smaller companies are getting into the mix too. There’s been a recent growth in proptech tools such as Chunker and Saltbox, which help companies needing smaller footprints find space in larger warehouses. Warehouse owners with small areas of available space due to a lost client or shipping delay can temporarily rent out square feet to tenants.

The Warehousing Landscape in SoCal

It shouldn’t come as a big surprise that Amazon is also looking to claim more space in Southern California. According to the company, the goal is for nearly every consumer in the area to be within 45 minutes of a distribution center.

Currently, Amazon has 32 distribution centers in Southern California and recently closed a $128 million deal for nearly 300,000 square feet of space on a 43 acre lot in Simi Valley. Another 138,000 square feet was recently purchased for over $38 million near LA specifically for conversion to a last-mile distribution center.

There’s no denying the demand for warehouse space will continue to rise in the coming years. As consumers focus on fast delivery and convenience, brands need to find ways to get closer to consumers. That leaves an opportunity for growth for savvy industrial investors.

Mandri Capital has closed over $100 million in financing for in-demand and growing investments like creative office space, music studios, apartments, and last mile industrial properties, nationwide.

If you’re interested in learning more, don’t hesitate to get in touch with Max Friedman via phone at (310) 554-6401 or email mfriedman@mandricapital.com for a confidential discussion on your pending deal.