When the Market Gives You Lemons — Distribute Lemonade

When the Market Gives You Lemons — Distribute Lemonade

A large steel structure is coming out of the ground in North Oklahoma City / South Edmond on the east side of North Lincoln Boulevard, between Memorial Road and NE 150th. A building this size always brings questions from readers and this one was no different. The 270,000 square foot distribution warehouse is being built for FedEx Ground Package System, Inc. This 45-acre lot was purchased for $4,914,000. Crossland Construction Co., Inc. out of Columbus, Kansas is handling the general contractor duties on the project. This is the second significant announcement from the e-commerce support industry expanding in Oklahoma City. The first was the new 300,000 square foot Amazon “sorting facility” on 132 acres at the corner of SW 15th and Council Road.

Amazon has seen a 97% increase in year-over-year sales. Their phenomenal increase is chipping away at the sales of brick and mortar national retail chains, like Walmart, Target, Barnes and Noble, etc. In an effort to fight off competition, Walmart paid over $3 billion for the fast-growing online retailer Jet.com. Those of us in real estate academia have been predicting this trend for years, but the purchase of Jet.com by Walmart and construction of these huge distribution warehouses confirms what we believed. At the same time, Walmart announced it will slow new store openings and focus on increasing sales in the online space.

Ted Jones, Ph.D., the Chief Economist and Senior Vice President for Stewart Title Guaranty Company, presented data to the Oklahoma real estate community that showed retail and industrial as the strongest real estate segments in Oklahoma City. While residential and office segments appear to be slowing, rents for industrial space continues to show gains in price per square foot.

While the continued consumer move to online purchases is probably not good news for retail in Oklahoma City, it could be really good news for the growing industrial space in our market. With access to interstate highways, rail infrastructure, underutilized airport capacity, relatively inexpensive land, and a centralized location in the middle of the United States, Oklahoma City metro area is one of the most attractive regional and national distribution plays in the country. The current repositioning of investments away from large brick and mortar retail stores to large modernized distribution centers might be an effort to feed the growing online e-commerce marketplace. When given lemons – make and distribute lemonade!

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