Britton Burdette

MIAMI—Investors still love FedEx industrial buildings—and for good reason. These are stable investments with compressed cap rates. But what changes are happening in the FedEx logistical network? And how might that impact investor interest? caught up with Britton Burdette, an associate director at Stan Johnson Company, to get his take on all things pertaining to FedEx leased assets in part one of this exclusive interview. Be sure to return to this afternoon’s Miami edition for part two. How would you describe the state of investment in FedEx industrial buildings across the U.S.?

Burdette: The state of the market for FedEx leased assets is as robust as it has ever been. From 2012 to 2013 the transaction volume was up over 33%, while the dollar volume was up over 7%. Overall, cap rates compressed 25 basis points in this same time frame.  

In 2013, the Ground segment contributed 63% of sales volume of FedEx transactions. As a firm, Stan Johnson Company has been very active in the FedEx market, trading over $175 million worth of FedEx facilities in 2013, up from $147 million in 2012, an increase of over 19%. How does investment compare with the three major segments: Ground, Express and Freight when it comes to pricing, volume, etc.?

Burdette: The ground segment has seen the most aggressive cap rates while contributing 63% of all FedEx industrial sales volumes in 2013. The majority of the new facilities being built for FedEx are in the Ground segment, and this is a trend that will continue. We are seeing cap rates for the most mission critical new Ground facilities trading in the low 6 cap range.  

The express segment is largely built out, so there are limited new facilities coming online to sell as new assets, which has kept the transaction volume down. Most Express sales are coming to market with seasoned or renewed leases. The freight segment has seen a few new facilities recently but not nearly to the same degree as the Ground segment. Again, this keeps the transaction volume down. What changes are you seeing in the FedEx logistical network?

Burdette: The Ground segment has been adding larger hub facilities closer to denser population basis to their network. The need for these facilities is being driven largely by the increased amounts of online shopping. These facilities are typically over 100,000 square feet and built using concrete tilt up construction.

Hub facilities typically come with 15-year lease terms as opposed to the smaller metal prototypes located in smaller markets that have 10-year lease terms at the start. These are the most mission critical locations in the FedEx Ground network and, therefore, investors are regularly bidding down cap rates for these offerings.

Be sure to return to this afternoon’s Miami edition for part two of this exclusive interview.