JLL closes gaps in global pandemic retail distribution needs
New JLL task force offers retail owners, occupiers and investors one team to solve both real estate and supply chain distribution needs
CHICAGO, Sept. 21, 2020 – The longest economic expansion in the United States was abruptly halted due to COVID- 19 and the pandemic caused retail stores across the nation to temporarily shut their doors. It also made many consumers too scared to leave their homes, but here’s the catch: consumers still shopped, just online – in record numbers.
Were retailers prepared to shift their businesses to 100 percent e-commerce operations? Not so much.
"Not many retailers could have foreseen the dramatic acceleration in online spending and pick up in store (dubbed BOPIS) that the pandemic threw at retailers,” said JLL’s Global Retail Chairman, David Zoba, who for three decades operated some of the world’s largest apparel brands. “Retailers were stuck between the operating challenges of meeting physical store regulations, which often differed for each location, while also facing increased pressure to meet online order demand. Plus, we were sorting product distribution options in a marketplace that was occluded on who could deliver at all.”
Zoba, and JLL’s retail and industrial experts, learned from the front-lines helping retailers of all sizes and sectors, pivot their business models and ratify their supply chains to handle new volume and last mile distribution demands over the past six months; and its prompted JLL to a new strategy for solving retailer pain in a post-pandemic world.
While JLL has always operated with deep expertise in both retail property management and capital markets services for investors and brokerage for occupiers; those services typically dealt with the corporate real estate executives. The supply chain strategies were directed by the CIO or CFO, which JLL’s industrial experts would help validate and improve their delivery systems in separate functions.
JLL has seen a melding of the professionals inside retailers as product and distribution become one, not separate considerations. To simplify the retailers’ needs, JLL has formed its own blended service model, in one dedicated Retail Industrial Task Force that caters to the entire lifecycle of evolving real estate requirements between retailers and retail property owners. JLL’s Retail, Industrial and Capital Markets business line stakeholders will unite to deliver customized real estate solutions, offering clients an end-to-end approach that spans the full depth and breadth of the firm’s expertise.
“Pre-COVID, only the top global retailers were truly investing in and focusing on the last mile,” said Kris Bjorson, Head of Retail e-commerce Distribution, Americas at JLL. “Now, that U.S. consumers have helped e-commerce surge above 20% of total retail sales - a three- to- five year leap forward, we see a tremendous opportunity to help all retailers in a better way - integrated as one team with every area of expertise required today.”
JLL will provide professional advisory services and solutions to retail owners, occupiers and investors in the U.S. that includes:
- Supply chain consulting;
- Retail & e-commerce distribution;
- Urban logistics;
- Retail redevelopment;
- Capital Markets scoring system for portfolios;
- Industrial diagnostic process; and
- A proprietary system that looks at demand and metrics of real estate.
“Retail as an industry is in recovery mode, and to maximize opportunities it requires a current understanding of capital markets and how institutional investors value assets. Investors were already eying the increasing number of retail vacancies prior to the pandemic, which subsequently has increased demand for domestic manufacturing,” said Naveen Jaggi, President of Retail Advisory Services, Americas at JLL. “Dark stores or vacancies often present an ideal opportunity for last mile fulfillment center conversions especially as e-commerce delivery competition continues to grow.”
The reality is that there isn’t a great deal of vacancy in industrial space, with a national vacancy rate under four percent.
“Industrial rent growth remains positive and vacancy rates continue to see historic lows providing attractive, stable, long-term returns to investors,” said Craig Meyer, President of Industrial, JLL Americas. “Some sectors are growing in demand faster than available warehouse supply—especially in high-density urban environments—making conversions even more opportune to lessen the impact of labor, construction and infrastructure costs associated with a complete rebuild.”
The cold storage sector in particular continues to see radical demand. According to survey data from online grocery consultant Brick Meets Click, online grocery sales for delivery and pickup in the U.S. reached $7.2 billion in June, a 9% increase over May alone. As a result of the rise in online grocery adoption, e-commerce leasing totaled 55.9 million square feet year-to-date in Q2, and Food & Beverage increased to 11.4 million square feet.
Cold storage warehouse conversions require serious planning due to robust refrigeration regulations, just one of the many existing complexities in the industry that JLL’s task force will help clients seamlessly navigate. These issues will be executed specifically based on individual client real estate needs. Through property constraint evaluations, the team will guide clients through common challenges such as zoning; covenants, conditions & restrictions (CC&Rs); taxes; truck traffic; hours of operation; and pollution.
“There’s no denying conversions are a multifaceted undertaking and determining financial viability is often one of the biggest pain points in the planning process,” said Chris Angelone, National Lead, Retail Capital Markets at JLL. “By developing a total cost to profit model, our clients will have complete confidence in their spend, from assessing dark store assets to justifying rents and financing to exit pricing and beyond.”
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $18.0 billion in 2019, operations in over 80 countries and a global workforce of nearly 93,000 as of June 30, 2020. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com.