As e-commerce continues to transform the retail industry, the demand for dependable, affordable storage space is on the rise in the United States.
The trend is led by Amazon.com Inc., which is buying up warehouses throughout the country to support its distribution operations. In September, the online retail giant opened a warehouse in Fall River with 1 million square feet, employing more than 1,000 people.
But it’s not just Amazon that needs space, raising questions about what type of space is available for business locally.
“It’s tough to find space that’s affordable for storage,” said Kimberly A. Cornwell, founder of Celadon Road Inc.
The seller of organic and eco-friendly household and beauty products does most of its sales online, and Cornwell keeps her inventory stored in a renovated mill building in Cumberland.
The 4,500-square-foot space is a far cry from Amazon-like demand, but Celadon Road – which realized about $200,000 in revenue last year – falls more in line with the needs of many Rhode Island businesses.
“We’re not seeing people who want 50,000 square feet for e-commerce, but we might see 2,000 to 10,000,” said Neil Amper, vice president at Capstone Properties Inc., a real estate company with a regional office in Providence.
Cornwell’s concern, as she grows her business, is storage space is becoming increasingly scant, especially as more and more buildings are converted to office space. Her building, on Martin Street, is currently being renovated.
“You don’t need totally built-out space, but you do want clean and affordable storage area,” she said.
‘Warehouse space in Rhode Island is limited because there hasn’t been any new construction.’
NEIL AMPER, Capstone Properties Inc. vice president
Amper says it’s tough knowing exactly how demand for storage space will shift with the rise of e-commerce, but he noted a general lack of supply in Rhode Island.
“Warehouse space in Rhode Island is limited because there hasn’t been any new construction, so it’s kind of at a premium,” Amper said. “There’s not a lot around.”
Jeff Finan, partner at Providence-based Hayes & Sherry, a Cushman & Wakefield affiliate, agrees.
Finan, who joined the real estate services firm in 1990, has worked with such companies as General Electric Co., FedEx, Leviton Manufacturing and others to secure large manufacturing, distribution and warehouse space. He doesn’t typically deal with small warehouse space, but equates the large-scale warehouse market in Rhode Island to a chess game, saying companies – or, in this case, chess pieces – are moving around, but all on the same board.
“The one common theme is that it’s always been a low-supply, low-demand market,” he said. “That’s because it’s Rhode Island, and there’s not a lot of people moving in.”
Finan is hopeful the dynamic could change with the pro-economic-development agenda that’s formed under Gov. Gina M. Raimondo. He also points to Edesia Inc., a nonprofit manufacturer of ready-to-use foods, as a good example of a homegrown organization that’s increased its need for warehouse space.
The nonprofit, based out of the Quonset Business Park in North Kingstown, delivers millions of meals to malnourished children throughout the world by humanitarian-aid workers.
“They are the biggest exporter in Rhode Island,” he said. “They’ve done really great things, and built a brand-new, 80,000-plus-square-foot facility in Quonset.”
Meanwhile, while online sellers are eyeing more space, many brick-and-mortar establishments, especially large department stores, are struggling to keep from shuttering.
“We’re going through a real hard time in Rhode Island,” said Paul DeRoche, director of the Rhode Island Retail Federation. “Some of the retailers will have stores that close up, and the real estate companies will come along and turn them into restaurants and other uses.”
In May, Fitch Ratings went so far as to suggest defunct shopping centers could be converted to distribution sites for e-commerce purposes.
“The growth of e-commerce and the increasing emphasis on delivery speed, as well as pickup services for retail goods, will likely precipitate a convergence of industrial distribution and retail real estate,” according to the global rating agency. “We believe well-located retail properties and REITs with portfolios centered on consumer demographics will see continued demand as delivery and pickup services and an increased focus on demographics gain momentum.”
Peter Hayes, partner and colleague of Finan, was hired to sell the Swansea Mall. He’s skeptical large, empty retail spaces could be repurposed for e-commerce storage, saying the space and location make more sense for office spaces, or specialty practices, including health care.
“We see a trend where you would put doctors, or medical practices, into what was formerly exclusively retail space for a couple reasons: It’s typically in good locations, and people don’t mind going there,” he said.
The ongoing shift toward more e-commerce, however, is undoubtedly raising new questions about space.
But those questions aren’t being faced by everyone, as the shift isn’t having as drastic an effect on all local retailers.
Asher Schofield, co-owner of Frog and Toad in Providence, said his retail district on Hope Street is at 100 percent occupancy for the first time since he opened his shop 16 years ago.
“That’s the first time I can say that’s been the case here, and that speaks well in the face of Amazon and online commerce,” he said.
we lost Amazon due to lack of a location for a large warehouse. It is now time to start building these types of warehouses for future expansion.