UCI Center for Real Estate Summer Board Meeting Take Aways

Market Insights

Just got back from the UCI Paul Merage School of Business Center for Real Estate Summer Board Meeting held at the beautifully renovated Newport Beach Country Club. Amazingly smart, dedicated, and talented real estate professionals as always.

Retailers, E-commerce, Warehouse Construction Takeaways:


Retailers are finding their unique balance of online/instore sales and warehouse/instore fulfillment. Most retailers are carrying more inventory than before in order to strike this balance. This trendstarted in 2012 and inventory levels have steadily increased through present day. Some retailers have even shut down distribution centers in order to redistribute fulfillment through retail locations and other distribution centers.


Retail landlords are having to creatively design and capitalize projects in order to repurpose failing retail centers. The United States is approximately 300 mall closures from right sizing proportionate to our population size.


Warehouses range from Large DC’s, to Replenishment DC’s, cross docks and last mile depots. Cross dock facilities are the unlikely darling of the investment community, especially within urban markets. Last mile warehouses might slightly overvalued based on desire for proximity to the customer while lacking Class A industrial features.


Amazon has +/-150,000,000 SF of distribution centers across the country and continues its growth rapidly. While they may have pioneered warehouse automation with the likes of Kiva, automation in the warehouse is in its infancy throughout the ecommerce ecosystem. Packing, picking, security, trucking and more. Imagine robots within the warehouse ensuring that no unauthorized personnel are within the building. Imagine electric trucks driving within a convoy like military vehicles transporting equipment. Return facilities and reverse logistics to continue to grow. Increasingly dedicated warehouses for returns and reverse logistics.


24’ clearance warehouses were built in the 1980’s. 32’ clearance was the standard Class A warehouse clearance for distribution facilities for the last decade. 40’ clearance warehouses are prevalent today in new construction projects. 60’ warehouse clearance is being contemplated by major e-commerce companies with multiple levels of interior steel mezzanines. This means more people, more parking, more trailers, more trailer parking, more fire life safety, more water flow, etc.



Multifamily, Highrise Residential, Mixed Use Takeaways


In an increasingly competitive environment, the arms race to add amenities to residential projects has increased and shows no signs of stopping. There is no amenity or service that is not on the table. The customers’ expectations are for there to be dedicated ride sharing areas, pet friendly common spaces, high end reception and lobby, gyms with state of the art equipment, catering, food delivery, dedicated package and parcel mail areas, refrigerated storage for groceries, amazing cell phone reception and wifi coverage in every square inch of every space (elevators included), bike storage, bike valet, roof top bar, bartenders, restaurants, lounges, curated vending machines, pet spa’s, dog walking, curated events, activities, hair salons, markets, climbing walls, Peleton’s. Pets are the new kids. The list goes on. The pendulum has swung towards a more hospitability and service-oriented experience. What do residents want now? What do they want in 3 years when construction is completed? At what point throughout the process does a decision have to be made on what to build? At what cost? At what future rent or sales price?


Parking is a tricky situation. Subterranean and above ground structured parking is expensive. It is not easily adapted. Electric car charging stations are increasingly desired. What about in 3 years? How adaptable is the parking structure to additional charging stations? What if ride sharing requires less need for car parking? How easy is it to repurpose sloped cement drive aisles to alternative uses like gyms, self-storage units, nightclubs? Different cities are in different phases of the parking space requirement reduction game.


Then there is the age-old affordability versus regulation debate. Do we need easier paths towards increased development to increase the supply and reduce prices or do we need more regulation to mandate more affordable units? The debate rages on.


Lots of expert insight, lively discussion, and thoughtful moderation from the discussion leaders. Thank you for the thought provoking and engaging event.

Feel free to reach out if there is any topic or need that you would like to discuss further. You can reach me at 949-790-3151 and jbsmith@lee-associates.com.