Kensington Real Estate Group

As featured on GlobeSt.com

LOS ANGELES—From omni-channeling to more-efficient buildings, e-commerce has re-energized and enhanced both the retail and industrial sectors, said speakers at RealShare Los Angeles here last week. The breakout panel session “E-Commerce: Retail and Industrial Opportunities in L.A.” discussed the impact of e-commerce on both sectors.

Chris Hite, principal of Kensington Real Estate Group and Coreland Cos., said the double whammy of the recession and e-commerce helped fuel a number of categories that revitalized the retail sector, including fitness and other service businesses. “Smart retailers are embracing e-commerce. Soon, we won’t make the distinction between Internet and brick-and-mortar purchases.”

Howard Schwimmer, co-CEO and director of Rexford Industrial, said e-commerce has provided new solutions to help fulfil orders and create an Amazon-like experience for customers. “Pure e-commerce businesses are not that large a share of the industry; they’re not impactful enough.” He added that in the industrial sector, there’s a focus on “bringing more of a creative-office feel into our spaces rather than worrying or thinking about e-commerce. It’s the birth of the next wave.”

Marc Berg, director of development for Golden Springs Development Co. (Thrifty Oil Co.), said the new specs for e-commerce users are all about efficiency and looking at reducing travel time to customers. “We are 24-hour customers and we want everything immediately.” The important elements to e-commerce industrial buildings today are counter-clockwise circulation around a building to avoid blind docking, an emphasis on security—one way in and out—and 36-ft. clear heights. “There has been increased demand for this. It used to be 32 ft.” Also, echoing Schwimmer, Berg said there’s much more office build out within industrial buildings, as well as a number of other functions incorporated into the buildings such as energy efficiency. And the size demands continue to increase. “The demand for buildings above 750,000 square feet is crazy.”

When moderator Barbara Emmons, vice chairman of CBRE, asked Hite how now is different from the dot-com era, Hite said the ability to execute and fulfill is much greater now. “The early guys couldn’t assure purchase or fulfillment. We will do what we can to help the retailer thrive. Retailers will pay more rent if they’re healthy, so we want them to be. We’ve filled space that was empty during the recession, and now we want to raise rents.”

Emmons asked the panelists about developing e-commerce infill space in Los Angeles, and Schwimmer said, “We don’t have the opportunity to develop a lot of real estate for e-commerce use in infill space, but e-commerce users will work more with traditional buildings in infill markets to get closer to customers.”

Berg said there are CEQA challenges that create a problem for industrial developers of e-commerce space. “It’s challenging to try to find overriding issues to allow you to build your sites. We’re seeing much more need for truck and employee parking” as users are dealing with increased demands for production and delivery and as the density increases in these buildings. Emmons pointed out that e-commerce buildings are often entitled faster than straight industrial because they bring jobs.

When asked about the malls of the future, Hite said because of e-commerce, malls are now places of congregation and will be permanently. The era of malls as entertainment has arrived.

With regard to winners and losers in the e-commerce realm, the panelists mentioned winners as 3PL logistics providers and truckers, as well as consumers. Hite pointed out that e-commerce retailers have an increased need to know who their customer is and to market to them directly via their phones. “It might scare us [older demographic groups], but this type of marketing is geared toward Millennials,” who welcome and respond to it.