E-commerce may be stealing the spotlight, but in Chicago, food users play a significant role and have been one of the strongest user types, according to Craig Hurvitz, VP of marketing at Colliers International.
In terms of transactional velocity, food users have been the most active user type in three out of the five past quarters. Following the food industry, are warehousing and e-commerce business.
Currently under construction in Chicago is Whole Foods Market’s 140,000-square-foot build-to-suit project, according to a report from Colliers International. Baltic Foods, a food products supplier, signed a new 25,557-square-foot lease at 5808-5810 S. East Ave. in Countryside and Marketplace Brands, a food-based gift set company, also signed a new lease for a 103,987-square-foot building at 951 Fargo Avenue in Elk Grove Village. Kingdom Catering also signed a new lease for a 14,000-square-foot building at 401 N. Trumbell Ave. in Chicago.
Overall, in Chicago’s industrial market, the vacancy rate increased by 10 basis points to 6.69 percent between April and June and the current rate remains 22 basis points below the rate recorded during the second quarter of 2016, reported Colliers. The main contributors to the vacancy rate increase include vacant spec construction completions and Motorola making the move out of it’s 1-million-square-foot Schaumburg facility. Net absorption totaled 6.3 million square feet during the second quarter of the 21st consecutive quarter of positive net absorption. Also, nearly 5.3-million-square-feet of build-to-suit construction projects were completed between April and June.
On a national level, the grocery sector is experiencing the some of the most rapid change. That’s because, more or less, grocery shopping and food distribution has been the same for decades. One reason disruptors may have held back, is that the logistics involved with food distribution is often time sensitive, fragile and can be complicated by refrigeration requirements and expiration dates.
“It’s tough to move stuff along a cold supply chain, things going into homes, kitchens and restaurants. There are a lot of players in that orchestra that have to get it right,” Chris Cummings, Director of Colliers International’s National Food Advisory Team told RE Journals.
Even before Amazon purchased Whole Foods Market, grocery stores were facing competition from meal-kit delivery services and same-day delivery services such as PeaPod and Instacart. Some say the rapid change in the industry has caused lenders and investors to hesitate when they see a major grocery chain anchor a shopping center.
However, stores are figuring out how to keep consumers rolling through the door. Putting in prepared food stations, wine bars, coffee bars, comfortable seating and better lighting—essentially anything that improves the experience of shopping. Albertson’s recently bought Plated, a meal-kit company, but how they’ll use it to their advantage is still to be determined.
Another change Cummings has noticed is a lot more outside capital coming into the industry, signaling that opportunity and innovation are on the horizon.
“The consumer is changing and that’s one reason money is coming in. Now smaller companies can get distribution in Whole Foods or Fresh Market overnight. Consumers want local, small batch, non-GMO so the stores so they push these products on a national basis because the customers are screaming for it,” Cummings said.
In the past, real estate was secured by big companies, such as Kraft and General Mills, Cummings said, but not so much anymore. The changes are still in their infancy too so Cummings expects the upheaval to continue for a while.
Even though these changes feel like they happened faster than anything else, Cummings and other industry experts have “seen this looming for a while,” but he admits a lot of concrete moves have been made in the last 18 months.
Everything in the food industry from grocery stores to distribution and supply chain is ripe for improvement. As the sector gains more insight into consumer behaviors that will inform how technology and services can modify the sector.
“It’s an old school industry that’s been flipped on its head during the past 3 to 5 years and at the end of the day all these moves will end up benefitting the consumer,” Cummings said.