Industrial Logistics Warehouse

Definition

Industrial Logistics Warehouse – these are industrial projects that are designed to store goods for the eventual deliver to consumers and suppliers. They are specially designed to facilitate efficient movement of goods through the supply chain. The product type is evolving quickly and is being driven by demand from e-commerce. The asset class is also becoming automized and will be integrated with robotics which will move products within warehouses. New wholly-owned parks are now being developed which offer higher quality product, complimentary tenant mixes, and a focus on adapting to new technologies. These parks sometimes build speculative space – or pre-lease warehouses for build to suit clients. Finally, they have the ability to negotiate with tenants across their portfolio and offer significant Tis to attract a particular client.

Types

Truck terminal

– Cross-dock warehouses

General warehousing

Distribution warehouse

– Costal – or port distribution facilities

– Build to suit logistic warehouses

– Speculative logistic warehouses

– Free Trade Zone warehouses

Approaches, Relevance 

Cost – many class A warehouses are relatively recently constructed. Depreciation is a minor consideration, and the approach is considered applicable.

Sales comp or market approach – the problem in using this approach is that there is often very little comparable product in the market. This is changing however, as the industrial logistics market expands.

Income capitalization – rents are usually long-term and are structured with multinational companies. These rents imply strong and stable rents – which are what investors are looking for when investing in industrial assets. This approach is considered useful when valuing distribution warehouses.

DCF – the cash flow method is an important method because it takes into account time and income.

Value Impacting Factors

Storage space – new warehouses are surprisingly competitive with class B space, in terms of rental price per M3, which is a metric important to logistic companies. Class A projects have higher clear heights, which allow them to store more.

Access – the location of a project must be near main roads and must be closer to the city than certain toll booths. This will allow for trucks to distribute in the most efficient manner.

Important Inputs

Tenant credit quality – this is a key factor in establishing how strong and stable a lease contract is. Investors look for assets with strong and stable cash flows and often, multinational companies with corporate guarantees are the most stable tenants.

Docks – the greater number of docks implies that a warehouse can distribute more merchandise as it can load more trucks at one time.

Ownership structure – wholly-owned logistic industrial parks have advantages versus multi-owner parks: A) Better tenant mix B) Ability to adapt to new technology C) Provide solutions for users such as build to suits, Tis, and speculative space.

Recent Trends

Increased e-commerce demand 

Trend towards the development of wholly-owned logistic parks in Colombia, Peru, Costa Rica (Mexico has already made this shift) 

Deliverable

Narrative Valuation Report

1. Value considerations – which impact value

2. Scope, purpose, process of the report

3. Land summary, infrastructure summary

4. Building improvement summary

5. Goal of work product – scope

6. HBU – most productive, legal use

7. Valuation methodologies

8. Valuation summary – justification

9. Certification and conflict of interest declarations

Notable Markets

LLP, Coyol, Costa Rica

LLP, Coyol, Costa Rica

Colombia

Calle 80 – Bogota

Jamundí – Cali

Malambo – Cartagena

Mexico

Mexico City

Guadalajara

Monterrey

Peru

Lima

Lurin

CR-CA

San Jose, Coyol

Panama City

Guatemala

Notable Developers and Owners

Colombia

Latam

Pactia

Terranum

Peru

Latam   

CR-CA

Latam

Improsa

BCR