E-commerce and Industrial Real Estate
Pattillo is a familiar name when it comes to industrial real estate, with investments spanning the entire Southeast from Louisville, Kentucky down to Jacksonville, Florida. For 70 years, Pattillo has focused solely on the vertical of industrial development. They erected over 1000 industrial buildings in their respective territories and built a reputation of unrivaled excellence, but the industry has undergone a massive transformation since 1950. Versatility and innovation have always been a priority of their leadership team, and those principles are reflected by executives like CEO Larry Callahan to this day.
Callahan works diligently to prepare his organization for timely and effective transitions as the trends of industrial development change, but sometimes the trends can take decades to get up to speed. Most recently, the trend of “younger and taller” buildings has been pushing developers to new limits and producing a demand for monumental spaces that were unheard of before the 1990s. Over the course of 30 years, Pattillo shifted its top-end from 100,000 sq/ft buildings with a 20’ clear height to 1M sq/ft with a 40′ clear height. There are an unbelievable amount of logistical challenges presented by projects of that scale. With leaders like Callahan, Pattillo continues to maintain capacity and meet growing demands as e-commerce takes over.
The Demand for Fulfillment Centers
E-commerce is the biggest factor driving demand for these big buildings. Changes in consumer behavior are prompting companies to redesign their fulfillment systems so they can get products to customers faster. It’s not that retail is completely dying out, it’s that people are using retail for experience more than anything else. Online buying resulted in stores placing a much lower priority on stocking goods. If a consumer makes a buying decision, they can have the product shipped to them, sometimes within the same day. On the back-end, consumers don’t necessarily think about the massive operations that make instant gratification possible, but for Pattillo, it is all too familiar.
The demand for e-commerce is growing exponentially at about 10% per year, and that growth is accompanied by a demand for industrial buildings to maintain a sufficient fulfillment capacity. Companies like Amazon have somewhere in the ballpark of 400 fulfillment facilities now, which is the lifeblood of their ability to delight customers by providing an abundant variety of products with quick delivery for every order. The facilities are new because none of the buildings before the evolution could meet their needs, and the needs are continuing to increase as consumer demand skyrockets.
Property Challenges with Large Facilities
You cannot develop new facilities without land to lay the foundations, and it poses a new problem that was not considered in the past. Pattillo has accumulated thousands of acres of prime industrial land for development, but finding property for 1M sq/ft projects is becoming a massive challenge all over the country. Clean, 100 acre parcels near the interstate used to be sufficient for large operations, but with the nature of e-commerce, there is a now a gained advantage in placing facilities near population centers. On the up-side, malls and shopping centers are being converted and repurposed, but finding clean commercial property near metropolitan areas is nearly impossible.
Working With Pattillo
Partnering with Pattillo is not for everyone, and your firm needs to have the capacity to scale their project requirements up to 1M sq/ft or more. During the selection process, you will be dealing with roughly three people, and the biggest thing that Callahan looks for is team-oriented firms. Industrial developments of that scale have an overwhelming amount of people involved. Callahan needs experts in the building type who can work collaboratively in a high-pressure environment and have the drive to achieve shared success. Since they have their construction management team in-house, Pattillo’s typical process is to hire an architect, go through the design, and then bid it out for work. Most of the buildings they develop are in the 200,000 sq/ft range or above so many of the same players are involved at all levels. But, it is never too late to start building a relationship if your firm can tackle projects of that size. For more info on the impact of e-commerce and what Callahan looks for in design and construction partners, listen to our podcast episode, How to Win Work with Pattillo Industrial Real Estate, with Larry Callahan.