by Brianna Crandall — March 22, 2017 — As consumer needs and business demands evolve, so must commercial real estate, says full-service commercial real estate firm Transwestern. In the latest edition of its Insights magazine, Transwestern explores how specialization is driving value for tenants, investors and end-users across the retail, industrial and multifamily sectors.
Retailers embracing mobile data
- Retailers have long tracked how many consumers enter and exit their stores and at what hours. However, today’s more sophisticated retailers are now monitoring how customers move and interact with merchandise within stores, influencing commercial real estate decisions.
- Mobile data helps retailers improve the customer’s shopping experience, playing a role in store and product configuration as well as staffing decisions.
- Using a mobile app, retailers can personalize the experience, engaging directly with customers by suggesting new or similar items or sending the customer coupons or deal codes.
- Specialized data vendors such as UberMedia and Streetlight Data can provide data that shows consumer activity patterns and how customers interact with physical space.
- A more exact trade area can be established by plotting out all mobile interactions, which is highly beneficial for site selection.
Intermodal solutions overcoming e-commerce challenges
Online sales have challenged industrial site selection teams by making new and sometimes contrary demands on commercial real estate. Most merchants enjoyed lower operating costs in the early days of e-commerce by utilizing fulfillment centers outside of costly populated areas, but that model is quickly losing its luster.
- Many industrial suppliers are adapting to e-commerce changes and driving down costs by consolidating widely dispersed warehouses into hub-and-spoke networks, characterized by highly efficient facilities at the center that receive, store and ship commodities to customers.
- Large fulfillment centers are more likely to be drawn to intermodal hubs offering multiple modes of freight access including trucks, rail, and even air freight or a seaport, and savvy industrial users are showing a willingness to pay for premium locations.
- Site selection for these fulfillment centers should focus on functional optimization, identifying real estate strategies that improve operational efficiencies, output, productivity, employee amenities, and, ultimately, net operating income.
- Companies pursuing functional optimization in their space planning have significantly increased the quantities, densities and classifications of commodities they are allowed to store, exponentially increasing the building’s utility.
Micro-unit apartments appearing in secondary urban markets
In an increasing number of cities, the migration of residential renters into urban neighborhoods has accelerated rent growth and pushed even entry-level lease rates for downtown housing beyond the means of many recent college graduates, service workers and young professionals.
In the example highlighted below, Transwestern Development Co. is tapping that underserved segment of renters. Indie Apartments in Austin, Texas, combines 138 apartments and a ground-floor restaurant onto a half-acre tract in the thriving East Sixth entertainment district, just east of downtown. The property consists primarily of fully furnished 350-square-foot studios and 520-square-foot, two-bedroom units.
- High-efficiency studios achieve the high rent per square foot that developers and investors require to meet their return-on-investment (ROI) threshold while offering an affordable apartment with amenities and finishes otherwise found only in Class A, market-rate properties.
- Indie Apartments’ gross monthly rent is expected to be 20 percent below that of Class A efficiency apartments, making it a good choice for anyone in a life transition, from students to retirees and newly singles, as well as those who work downtown and business travelers.
- Because young renters show a preference for walking, biking, public transit and ridesharing over driving, micro-unit developments typically have reduced parking requirements, helping to control construction costs.
View the entire first quarter 2017 issue of the Insights commercial real estate magazine on the Transwestern Web site.