A real estate investment strategy was shared with me yesterday that I thought was interesting. The concept is called “Co-Warehousing” and it’s similar to co-working office space. They’re buying large industrial warehouses with high vacancy and then breaking up the space into 200 – 2,000 SF “units” with 10-foot modular walls and leasing those to smaller e-commerce businesses, wholesalers, local services, artists, etc. The common office space and loading areas are all shared. From a tenant’s perspective, there’s not much friction because they’re simply signing a 6-12 month lease and paying an all-inclusive rate with no TI’s needed. The strategy seems to have a lot of demand because they’re maintaining 95% occupancy with a strong NOI premium when compared to leasing to a single tenant. If you’re interested in learning more, the company is called Portal Warehousing and you can reach out to Nathaniel Neman. I’ll add a link to his industrial newsletter in the comments as well. FYI, this isn’t a sponsored post. I just thought it was interesting and worth sharing.
Brandon Roth who signed the lease with the landlord?
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Blue Co. Warehousing and Jason Widen are pioneering this concept in Raleigh as well.
I was given a tour of Portal Warehousing's Salt Lake City location pictured here by Andrew Runnette. It's a very cool concept and space, perfect for small businesses needing a low friction, relatively low commitment office/warehousing space.
This type of asset has been around for some time now and serves the small business ecosystem incredibly well with the advent of digital selling. Being that average consumers can connect with that. This type of offering is ideal for a public facing investment vehicle. Great, healthy margins + more affordable retail capital = unprecedented returns for investors and GP’s
Thanks for sharing with your network, Brandon! I hope everybody finds this insightful.
Saltbox ReadySpaces @cubeworks are all doing this. Curious to hear if the demand is really there to support elevated rents or if only in certain submarkets.
Brandon Roth - Have seen this concept cross my desk a couple of times. Definitely a challenge on the asset management side as managing that many tenants on such short leases takes a lot of operational work. For those doing this type of deal, I would do a separate op-co who is the master lease and can then sublease out the space. This way on the asset management on the prop-co side is much smoother and cleaner.