by Parker Snyder
With vacancy rates at extreme lows and tenants prioritizing location and project delivery speed, the New England industrial market continued to see dramatic growth throughout 2022, with an increasing number of developments being built on a speculative basis. The evolving market saw many players changing their warehouse development strategy, especially when it came to site selection, space utilization and operations, design flexibility, and more.
Developers and owners took a new approach to site selection as supply chain disruptions continued and speed to market took priority.
With long lead times on materials such as steel, roofing, precast concrete, and electrical equipment, contractors like ARCO worked to maximize delivery speed by rethinking the sequence in which development activities take place. Previously, a site would be selected, followed by due diligence, entitlement, permitting, and then building. In 2022, ARCO worked with developers and owners to begin ordering materials such as steel and roofing prior to entitlement to mitigate delays and long lead times.
The immediate demand for space by end-users also led to an increase in speculative development throughout New England, often with tenant improvement contracts being executed prior to completion of the building shell.
Design flexibility became the new norm as the need for logistics space with the potential to accommodate changing operations and a variety of end-users increased.
Beyond square footage, developers and owners looked to maximize facility and site flexibility as evolving trends in labor, operations, and automation impacted the needs of end-users. Factors such as car and trailer parking became increasingly important to accommodate larger labor forces and distributor fleets. The average number of docks and drive-in doors per facility also increased to accommodate large distribution operations and automation trends.
Additionally, developers and owners sought to maximize flexibility to accommodate a variety of end-user types and to create speculative builds that focused on decreasing time on retrofit. Developments that incorporate full dock, lighting, and HVAC packages, as well as speculative office spaces, can help ensure tenants are fully operational within the facility quickly.
Design-build delivery was critical to success and mitigating ongoing market challenges.
Developers and owners who prefer design-build delivery benefit from both a cost and schedule standpoint, as the integrated approach and work in the proposal phase consistently result in the most functional solution and substantial time savings. In 2022, design-build delivery was especially advantageous as it helped mitigate material pricing increases and extended lead times.
The design-build process combines the benefits of design ownership, financial risk, management of capital expense, and expediting schedule into a single point of responsibility. Because preliminary design is completed during the proposal process, owners benefit from the speed at which design-build delivery moves. Once a project is awarded, the design-builder can move immediately through the buyout process to secure material pricing and delivery dates while still completing design.
Expect these trends to continue into 2023 as demand for industrial space outpaces supply.
These trends in industrial development and the need for distribution and logistics space throughout New England will continue into 2023 as demand is expected to continue outpacing supply. With uncertainty in material pricing and delays, design-build delivery will offer a substantial advantage over the traditional design-bid-build delivery process. Partnering with an experienced contractor with national buying power, like ARCO, will be critical to success for those looking to mitigate market challenges, maximize design flexibility and efficiency, and expedite schedule.
Parker Snyder is director of business development for ARCO National Construction New England.