Accelerated e-commerce adaptation along with the need for supply chain resiliency and diversification have been primary demand drivers for industrial assets in the COVID era. As retailers and manufacturers increase safety inventories and diversify supply chains, strategically located distribution centers will continue to be vital.
This utilization of warehouse space is hovering around 85%, which is near capacity. In fact, rebounding activity and a decreasing supply pipeline could lead to a critical shortage of space in early 2021, according to a report by Prologis.
Two recent portfolio transactions encompassing four properties in each acquisition are prime examples of this demand.
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In the first transaction, KKR acquired four Greater Atlanta industrial distribution properties representing 1.6 million square feet for an aggregate purchase price of approximately $136 million. The properties were acquired from four different sellers.
The newly acquired properties consist of three shallow-bay last-mile distribution properties with an average vintage of 2006. The fourth property is a fulfillment center completed in 2020 which is leased to an investment-grade tenant on a long-term basis.
"These acquisitions are part of our ongoing effort to expand our industrial portfolio across high-growth Sunbelt markets," said Roger Morales, KKR partner and head of commercial real estate acquisitions in the Americas.
KKR is making the investment in the three smaller properties through its Real Estate Partners Americas Fund II. The fourth property is an investment by KKR's core-plus real estate strategy and the first industrial investment by the core-plus real estate strategy in Atlanta.
In the second industrial buy, Elion Partners acquired four West Coast last-mile industrial distribution assets for a total of $83 million. The acquisitions comprise 425,000 square feet spread across Vista and Union City, CA along with San Diego and Everett, WA.
"The assets complement our last-mile portfolio well with characteristics prudent to logistics real estate such as clear height and turning radius," said Shlomo Khoudari, managing partner at Elion. "With the addition of these assets, we expand our footprint in important locations across the West Coast and benefit from immediate operational cost-saving efficiencies."
This acquisition is another in a series of acquisitions the firm has planned for its last-mile portfolio aggregation strategy. In September, Elion acquired a 110,663-square-foot last-mile industrial distribution asset located in El Cajon, a submarket 15 miles east of central San Diego.
Elion plans to continue pursuing an investment strategy focused on first, middle and last-mile logistics assets, targeting core urban logistics hubs near large population centers in infill coastal markets including Seattle, San Francisco and Southern California.
Distribution center leasing momentum is pronounced across a broad range of industries and cities led by Southern California, New Jersey/New York, Dallas and Atlanta, according to Prologis.
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Lisa Brown
Lisa Brown is an editor for the south and west regions of GlobeSt.com. She has 25-plus years of real estate experience, with a regional PR role at Grubb & Ellis and a national communications position at MMI. Brown also spent 10 years as executive director at NAIOP San Francisco Bay Area chapter, where she led the organization to achieving its first national award honors and recognition on Capitol Hill. She has written extensively on commercial real estate topics and edited numerous pieces on the subject.
