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05 HARTFORDBUSINESS.COM | APRIL 19, 2021 | LOGISTICS & DISTRIBUTIONS Q&A: Experts Weigh In M idway between Boston and New York City, with competitive lease rates and access to Bradley International Airport — not to mention the ability to reach over 75 million Americans and over 30 million Canadians within eight hours' time via I-84 and I-95 — Connecticut industrial space is having a moment. Amazon's fulfillment center in Windsor, due for completion at the end of the year and set to bring 1,000 jobs over two years, is just one of many examples. These experts offered us insight into the market here, how it has been influenced by COVID and what's coming up. Q: Is the industrial real estate market boom, with tenants such as Amazon leasing space, due to more of us online shopping from home due to COVID? DUCLOS: The boom goes beyond that or online sales but speaks more to how a company gets its product to its customers. For instance, Walmart stores have, in part, turned into a logistics center, providing last mile services in the warehouse section of its stores, where you can go pick up what you need via curbside pickup. It's now about these companies going to the customers, versus the customers coming to them. In the case of Home Depot, they have restructured part of their distribution system, establishing warehouse centers that provide goods to its professional customers — contractors — rather than have them go to a store, where residential DIY customers go. METCALFE: The eCommerce revolution was well-established prior to the pandemic. COVID-19 accelerated the percentage of retail transacted using eCommerce platforms by increasing the amount of people using it as well as the frequency and order size of existing customers. eCommerce now represents almost 20% of total retail sales — that's a rate previously forecast for 2025-2026. ROBERTS: Naturally, eCommerce companies as well as their suppliers and fulfilment partners have accelerated supply-chain expansion. This includes industrial real estate, such as bulk warehouses and last-mile facilities as well as property such as trucks, packaging tooling, material handling equipment and advanced inventory and logistics software. Most agree that consumer behavior learned during the pandemic will endure to some extent, and that age demographics will continue to drive up the eCommerce percentage of retail into the foreseeable future. Q: Do you think COVID has impacted the distribution industry in lasting ways? DUCLOS: COVID opened other markets, such as food distribution. Before the pandemic, we didn't buy things like groceries online as much as we do now. Those are things COVID has changed or at least accelerated. In 2019, industry data shows that groceries made up 5% of all online distribution sales. During the pandemic that number increased to 10% — now the question becomes, will that percentage stay at 10%? Q: What do you foresee as next in 2021-2022 for Connecticut in terms of industrial space? ROBERTS: Over the next two years, the Connecticut industrial market size will grow substantially. There are several developments currently making their way through the entitlement process. Provided they are secured, we should see 10 or more facilities totaling upwards of 6 mil- lion square feet of space built or under construction before the end of 2022. Demand for large facilities that are a million square feet or larger is significant and, with several large site securing entitlements, we see a likelihood that a few of these may be built in Connecticut. METCALFE: As the Northern New Jersey and Suburban Boston markets have seen supply diminish — and prices or lease rates skyrocket — many occupiers of warehouse space have started to see the I-91 Corridor as a great place to locate, where they can still reach the same customers with lower lease rates. ROBERTS: Rates and property values will continue to increase while vacancy rates will decrease with significant positive absorption realized. Demand will be driven predominantly by the eCommerce, food and beverage, and medical supply industries. Meanwhile, I think reverse logistics — the handling of all the returned items bought online — will become a new industry that drives demand for warehouse space. By Susan Shalhoub Mark Duclos Co-founder & president Hartford's Sentry Commercial Kyle Roberts Vice president CBRE of Hartford Christopher Metcalfe First vice president CBRE of Hartford