Worcester Business Journal

6 Worcester Business Journal | February 17, 2020 | wbjournal.com More need for online fulfillment centers has turned the I-495 belt into a distribution hub Warehouse demand BY THOMAS GRILLO Special to the Worcester Business Journal T h e P E N TA B u i l d i n g / 2 0 8 Tu r n p i ke R o a d / We s t b o r o u g h , M A 0 1 5 8 1 / 5 0 8 . 6 1 6 . 9 9 0 0 W E S A L U T E A N D T H A N K A L L W O M E N W H O L E A D A N D A S P I R E TO L E A D WITH SPECIAL GRATITUDE TO OUR FEMALE CLIENTS PAVING THE WAY FOR THE NEXT GENERATION. multi-year winner BEST WOMAN-OWNED BUSINESS F ueled by the demand for distribution space to fulfill burgeoning online sales orders, the Central Massachusetts' industrial market was among many regions in the U.S. to reap the ben- efits last year, according to a report by Cushman & Wakefield, a global commer- cial real estate company. Internet retail sales in the U.S. reached $365 billion last year, up nearly 16% over 2018, and by 2024 e-sales are expected to reach $600 billion, according to Statista, an online data company. at's good news for industrial and warehouse owners who saw rents rise, making them very attractive to investors looking to buy. "e demand for very modern, high- bay distribution space is very strong," said James Umphrey, a principal at Kelle- her & Sadowsky, the Worcester com- mercial real estate brokerage. "It's clearly being driven by rising internet sales." As a result, year-over-year industrial rents for much of the industrial space has risen by more than 11%, Umphrey said. One year ago, the average per-square- foot rent for warehouse was $6.75 per square foot. Today, it's fetching as much as $7.50, he said. Cushman said two kinds of indus- trial space are doing well: Distribution centers where products are received and distributed; and fulfillment centers where items arrive in bulk, are broken down, and shipped. A distribution hotbed Demand has risen high enough some warehouse space is even being built on spec, the industry term for when a tenant isn't yet lined up. at was the case for a $30-million, 345,000-square-foot distribution facility in Bellingham where construction began in November. e new facility at 160 Mechanic St., called Lincoln Logistics 36, is expected to be completed by the fall of 2020. Connecticut financial services firm Barings and Boston property manage- ment company Lincoln Property Co. have teamed up for the Lincoln Logistics 36 project. Lincoln Logistics 36 will be in an area of the I-495 belt becoming increasingly popular for logistics. A Garelick Farms distribution facility is just over a mile to the east down Route 140, as well as the paper distrib- utor Lindenmeyr Munroe, the building material supplier BlueLinx, and the retailer Mattress Firm. A new facility just over a mile away on Maple Street is shared by the con- venience store chain 7-Eleven and the snack maker Snyder's-Lance. Another on-spec facility opened last year on Bartlett Street in Northborough. e building was 70% leased by the time it opened. Sale prices for such buildings have soared. In March 2019, a FedEx warehouse in Natick sold for just under $52 million. Last May, a Milford warehouse used by Amazon and a communications equipment supplier sold for $33.6 million. Last fall, a Boston realty group, Mar- cus Partners, paid $31.6 million for two adjacent warehouses on Grove Street in Franklin. e other factor making these build- ings attractive to investors is companies like Best Buy, FedEx, and Amazon having good credit and typically signing extended-year deals with built-in rent hikes. "ese companies are definitely build- This is the rendering for the Lincoln Logistics 36 project underway in Bellingham, which is being built without a tenant lined up. Jim Umphrey, principal at the Worcester commercial real estate firm Kelleher & Sadowsky, says warehouse demand is driving up lease prices. PHOTO/WBJ FILE RENDERING/COURTESY OF LINCOLN LOGISRTICS 36

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