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colliers.com/food
4TH QUARTER | 2013
Quick Bites
Food Advisory ServicesAs we begin to project what we think will occur in the food industry in 2014, it would be a disservice not to look back at the major themes that surrounded us in 2013. Five primary themes that seemed to have an effect on consumers and ultimately the real estate market include:
NATIONAL TRENDS• Large volume of M&A–led by 3G’s acquisition of H.J. Heinz and Sysco’s pending acquisition
of US Foods (to be closed 3rd QTR 2014). Each will cause massive consolidation, job reductions and the shuttering of many facilities.
• Older line brands, such as Hostess, selling off parts to Private Equity fueling a glut of older facilities to possibly be re-started or redeveloped.
• New food retailer growth becoming the darlings of Wall Street. It seems organic (Annie’s IPO in 2012) and “green” (Steve Case’s investment in retailer Sweetgreen) companies have been viewed favorably by investors. A few significant IPO’s occurring in 2013 included Sprouts and The Fresh Market – both companies forming their own niches within the retail space. The growth of these firms will undoubtedly lead to additional 3PL business and an overall tightening of freezer/cooler spaces in the major metro markets.
• Continued investment in automation – occurring across all verticals of the food supply chain. Investments “inside the box” of these facilities have begun and will continue to far outweigh the cost of the shell, begging the question for users as to what is the best way to finance these build outs going forward. Creative financing solutions will continue to be investigated by all parties.
• Amazon’s foray into the grocery world. Time will tell, but if history is a teacher this is not a “trial project” and they will continue to pour money into the grocery delivery business until they get it right.
As we roll into 2014, we are positive the above themes will continue to accelerate. These actions will present both good and bad news for various communities and investors across the United States.
Please find enclosed our updates by region. As always, please feel free to reach out with any questions and/or comments.
INSIDE THIS ISSUE
- NATIONAL TRENDS
- CENTRAL—TEXAS
- MIDWEST—CHICAGO
- NORTHWEST—SEATTLE
- SOUTHEAST—ATLANTA
- SOUTHEAST—FLORIDA
- SOUTHWEST—SOCAL
Real Estate News for the Food & Cold Storage Industries
Accelerating success.
This document has been prepared by Colliers International for advertising and general information only. Colliers International makes no guarantees, representations or warranties of any kind, expressed or implied, regarding the information including, but not limited to, warranties of content, accuracy and reliability. Any interested party should undertake their own inquiries as to the accuracy of the information. Colliers International excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss and damages arising there from. This publication is the copyrighted property of Colliers International and/or its licensor(s). ©2013. All rights reserved.
Key Contacts“NORTH AMERICA’S DEDICATED REAL ESTATE ADVISOR TO THE FOOD INDUSTRIES”
Colliers Food Advisory Services
QUICK BITES | 4TH QUARTER 2013
NORTHWEST
Matt McGregor 206.624.7401 [email protected]
CANADA
Stewart Metcalfe 416.620.2820 [email protected]
SOUTHWEST
Pat Remolacio 949.724.5585 [email protected]
John Long 949.724.5534 [email protected]
CENTRAL
Tom Pearson 214.217.1277 [email protected]
Chris Teesdale214.217.1233 [email protected]
Ed Miller813.871.8507 [email protected]
Dolores Seymour 813.871.8506 [email protected]
SOUTHEAST—FLORIDA
SOUTHEAST—ATLANTA
CHICAGO/MIDWEST
Tom Condon 847.698.8212 [email protected]
Chris Cummings (TEAM LEAD) 404.877.9255 [email protected]
Turner Wisehart 404.574.1008 [email protected]
QUICK BITES | 4TH QUARTER 2013 QUICK BITES | 4TH QUARTER 2013
Central—TexasOverall Industrial Market: DFW is experiencing record low vacancy rates in industrial - 6.7% at year-end 2013. The DFW industrial market now boasts a total of 612 million SF of warehouse space, 118 million SF of which is Class A space. Our industrial market has received considerable media attention lately spotlighting our record industrial absorption in DFW at 16.2 million SF in 2013. Significant growth in ecommerce is generating more interest in DFW as a location for distribution and large fulfillment centers, with distribution requirements ranging from 600,000 - 1,000,000 SF. Hence, more developers from outside the market are moving into the DFW market to get in the build-to-suit and spec building game.
Notable Transactions:
• Quaker/Pepsi - 1,200,000 SF
• Carolina Beverage - 399,000 SF
• Wal-Mart - 788,000 SF
• SYGMA (div. of Cisco) - 552,000 SF (180,000 SF is freezer/cooler)
• Grocer’s Supply - Acquisition of 129 acres for constructing a 740,000 SF distribution center expandable to 1.2 million SF (refrigerated and dry warehouse)
• Sprouts - 117,000 SF
• Trader Joe’s - acquisition of a 775,000 SF warehouse
Midwest—ChicagoOverall Industrial Market: Continued strong demand for freezer/cooler space drove Food/Cold Storage non-3PL vacancy rate down to just 5%, a significant improvement from one year ago.
Build-to-suit transactions dominate user absorption volume. This quarter, Trader Joe’s moved into a two-building complex totaling 695,000 SF, while Dawn Food Products took possession of 120,000 SF.
Food Facilities: Demand for cold storage and food processing facilities remains high, while supplies dwindle. This has caused an increase in build-to-suit activity. Class B and C vacant stock represents the bulk of all vacant supply in Chicago.
Notable Transactions:• Sysco Corporation leased the 186,954 SF
former DPI facility in Arlington Heights, IL, northwest suburb of Chicago.
• Institutional investment has an appetite for cold storage faci l i t ies. Bridge Development Partners, LLC recently purchased two cold storage facilities (250,000 SF and 54,100 SF) in the Chicago area with pricing exceeding $100/SF. Addit ional ly, AR Capital acquired 159,000 SF in Belvidere, an outlier market northwest of Chicago for $121/SF.
• Construction is underway on a 229,000 SF freezer facility for Supreme Lobster in New Lenox, IL, located south of Chicago on I-80.
Northwest—SeattleOverall Industrial Market: With the vacancy rates staying below 6% for the entire year of 2013, the battle for space is getting tighter and available product is getting harder to come by. However, there is light at the end of the tunnel as 2013 saw a sharp increase in investor interest with over 50 proposed properties totaling over 9M SF of available space. Although the region recorded its first negative absorption of the year in Q4, -295,474 SF, the year to date tally saw a
positive absorption total of 1,441,314 SF. This nearly 1.5M SF of positive absorption drove the year end vacancy to 5.2 percent which is the lowest year-end total since before 2004.
Notable Transactions:• Dawn Foods signing a 5 year term in
Seattle for 125,000 SF
• Coke signing a 5 year lease for a Distribution Center for 135,000.
Southeast—AtlantaOveral l industrial market: Corporate consolidations continue to drive the bulk market (over 500,000 SF), but the limited amount of vacant space and the specialty nature that the users require in design configuration is driving many build-to-suits. First speculative 1MM should come out of the ground by Summer.
Food Facilities: Market has tightened considerably with the majority of vacancies with freezer/cooler in the 20,000 to 60,000 SF range. In 2013 there was over 500,000 SF of freezer and cooler absorption occurring across distribution, manufacturing and processing verticals. Low wage, water and utility rates will continue to drive demand into this region from West Coast companies. There are significant retailers looking for build-to-suit sites, as well as a major cold storage 3PL looking to enter the market.
Notable Transactions:• 130,000 SF Unilever facility under
contract to a regional manufacturer
• Dawn Foods 60,000 SF expansion
• Nordic Cold Storage opening up new facility in Savannah
Southeast—FloridaOverall Industrial Market: Former grocery chain warehouse vacancy dominates availability in Central Florida. Most prominent are Sweetbay/Food Lion (768,000± SF of which 208,000± is freezer cooler); Kash n Karry/Food Lion (681,770 SF of which 171,000± SF is freezer cooler). Other available properties of 200,000 SF or greater include Associated Grocers (Ocala) and US Foodservice (Ormond Beach).
Food Facilities: Food building inventory 16± million SF continues to be controlled by user/owners. Overall vacancy in food/beverage space has risen to 5.9%, while overall industrial vacancy hovers at 10.3% for the past two quarters.
New Construction:• Trader Joes is conducting site selection
along the Interstate 95 corridor on Florida’s east coast for a 700,000 SF distribution center to serve new retail facilities from southern Georgia to south Florida.
• High level forecast for food facilities: as Florida population growth eclipses New York to become 3rd most populous state, expect new food/beverage space to be developed.
Southwest—SoCalOverall industrial market: Positive net absorption continues for the 14th straight quarter. Industrial demand continues to outpace supply, particularly in properties for sale and lease and sale prices continue to inch up.
Food Facilities: Both temperature controlled warehouses and food processing facilities are in short supply; however, demand for modern freezer/cooler warehouses far exceeds that
of processing buildings. Large processors continue to exit the market and any new processing requirements (typically for fresh product) opt to build-to-suit or retrofit.
There is no speculative construction of food related buildings and absorption for food related facilities has been positive. Excess temperature controlled warehouses are being taken by regional cold storage operators who are making a push to win new business with smaller, local food manufactures. Demand continues to focus on the port markets as well as the infill areas in the Los Angeles basin.
In general, there is a push towards ownership among food manufacturers and distributors as institutional owners have failed to satisfy current demand.
Notable Transactions:• Whole Foods purchased land from the
City of Vernon and is building a 275,000 SF temperature controlled distribution center.
• Veg Fresh purchased a 130,000 SF dry distribution building in Corona and is converting it to cooler space. They plan on vacating their current facility in Orange County.
New Construction:• Whole Foods
• Lineage Logistics and Baker Commodities are under construction on a 256,000 SF freezer/cooler facility in the Port of Long Beach which will include a temperature controlled 50,000 SF cross dock and rail service.
• Lineage Logistics is under construction on a 420,000 SF multi-use cold storage warehouse in Colton.
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