These major developments embody the changing nature of our industry and further cement the notion that site selection as we know it will never be the same. The question now becomes: how can we evolve our real estate mindsets and adapt to the rules of this new economic climate to ensure sustainable success into the next decade and beyond?
Retail’s decline paves way for industrial’s rise
The retail industry’s precipitous decline has inspired major questions for people within the site selection industry and companies looking for new locations. How will these buildings be repurposed? What industries and business activities will fill the gap and make up the sales tax dollars lost by the companies that previously occupied these facilities? An exciting solution could be to repurpose designated retail space for industrial use.
While the trend of consumers buying products online is nothing new, Amazon’s acquisition of Whole Foods and the introduction of Amazon Fresh—along with emerging competitors like Instacart—have fundamentally altered the way that consumers shop for groceries and food. With consumers no longer visiting the physical grocery store as often as in the past, communities and companies have an opportunity to repurpose retail facilities into distribution centers and warehouse facilities to support the evolving delivery needs of our economy.
By 2025, 24 percent of all retail sales will occur online. As retail continues to be further driven by e-commerce, corporates should seek out site selectors and economic development organizations (EDOs) that carefully balance all options and look for innovative ways to repurpose space that has fallen out of favor within its own industry.
Evolving economy brings current and future challenges
2018 became a year of challenges for site selection, with the lack of skilled workers and usable buildings serving as the biggest risks within the industry—and these market pressures don’t seem to be going away any time soon. Our economy’s reliance on tech is only expanding and shifting job needs. Major layoffs at large corporations such as GB, US Bank and Wells Fargo have signaled a fundamental shift in both the products consumers want and the jobs that will produce them.
These factors have made it imperative to not only repurpose underutilized buildings but also reevaluate our labor and workforce to fit the needs of our economy. Additionally, manufacturers are beginning to compete with Google, Apple and other tech giants for the top tech talent, which will have a profound impact on their facility needs and future site selection strategies. The tightness in the industrial real estate market is a concern for a lot of my clients. We have a shortage right now - across the country - of good industrial real estate.Bradley Migdal, Senior Managing Director, Business Incentives Practice, Cushman & Wakefield, Inc.
It is paramount for corporates to understand these fundamental changes in our economy and workforce as indicators of what is to come. Understanding these issues will help inform the best ways to develop and repurpose facilities to align with corporates’ current and future needs for top talent.
While 2018 was rife with disruption, key economic headwinds and trends signal that this may only be the beginning. As technology continues to drive our economy and critically alter the way Americans live, work, play and consume, corporates will have to stay nimble, think innovatively and keep their fingers on the pulse of a rapidly changing economy to sustain success into the next decade and beyond.
Successful corporates will help EDOs enhance the skills of both the currently unemployed and future workforces to better align with the future needs of our economy. These investments will result in a solid foundation that ensures sustainable economic development until the next major wave of real estate disruption.
Editor’s note: Area Development’s Miami Consultants Forum featured a keynote speech from Brad Migdal, Senior Managing Director at Cushman & Wakefield, on the current and evolving state of the site selection industry and industrial real estate market. The preceding were some key topics from Migdal’s address and subsequent interview with Area Development as compiled by Jennifer Harris, Area Development contributor, Akrete, Inc.