You could in­vest in tech — or in ware­houses

Austin American-Statesman - - BUSINESS - By Rob Ur­ban Bloomberg News

For­get your fancy of­fice tow­ers. The fu­ture lies in ware­houses.

But not just any old dusty de­pot. It’s got to be big enough, smart enough and close enough to con­sumers. Pick right and you could beat the re­turns of ev­ery other kind of prop­erty this year.

Real estate in­vest­ment trusts that spe­cial­ize in in­dus­trial prop­er­ties, such as Prol­o­gis Inc., Rex­ford In­dus­trial Realty Inc. and

NAustin ing that will be the na­tional head­quar­ters for SHI’s small- and mid­size sales or­ga­ni­za­tion.

“A decade ago, we opened our first cor­po­rate call cen­ter in Austin with a hand­ful of em­ploy­ees,” Ter­reno Realty Corp., are out­per­form­ing REITs that fo­cus on malls, res­i­den­tial rentals and of­fice build­ings. The three com­pa­nies all re­turned more than 16 per­cent in the past year, crush­ing other types of real estate — and hand­ily beat­ing their own peers in the Bloomberg REIT In­dus­trial/ Ware­house in­dex, which reaped 8.3 per­cent.

It’s all about e-com­merce. On­line shop­ping still ac­counts for less than 10 per­cent of re­tail sales in the U.S., but is re­con­fig- ur­ing sup­ply chains and shap­ing the for­tunes of ware­house land­lords. De­mand is es­pe­cially keen in and around big cities, where on­line shop­ping has caught on fastest.

Those are the same places — New York, Bos­ton, Chicago, San Fran­cisco, Los An­ge­les — where land parcels big enough for the lat­est ware­houses and load­ing docks are scarcest, and rents are high­est.

On­line re­tail­ers re­quire about three times the ware­house space of tra­di­tional brick-and-mor­tar stores, and more-so­phis­ti­cated lo­gis­ti­cal ser­vices.

“E-com­merce has taken a busi­ness that was al­ready pretty solid and tur­bocharged it,” Prol­o­gis Chief Ex­ec­u­tive Of­fi­cer Hamid Moghadam said. Among other dif­fer­ences, he said, “in a reg­u­lar ware­house that sup­plies a re­tail store, you are deal­ing with pal­lets of goods that are moved around. In the case of e-com­merce, there is a lot of pack­ing and han­dling.”


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