🔒Repurposing CT’s industrial real estate for the e-commerce age

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To say that the rise of Amazon and other e-commerce companies has disrupted the retail and real estate industries would be an understatement.

It has altered the way we shop and changed our expectations of how quickly our online orders will be delivered. Additionally, retailers are choosing to open their brick-and-mortar stores in more select and high-demand markets, and then relying on quick delivery times between stores for any products they may not carry.

Some startup retailers are minimizing risk by building an online presence first and then opening stores in markets where they have been successful.

As a result, retailers are reconfiguring their supply chain to accommodate this shift in quick delivery dependency, resulting in an increased demand for industrial space located closer to population centers.

Warehouse and industrial spaces have become critical to retail success, given the role they play in expediting delivery times to stores and consumers. Big-box stores requiring large warehouse spaces have typically looked for facilities on the outskirts of population centers, where facility uses include fulfillment, sorting, redistribution and returns.

Urban facilities, which are smaller in size, complement the regional hubs and assist in enhancing the speed of the delivery of goods in the “last mile.”

Aligning a vacant property with a new e-commerce tenant is a win-win for the property owner and the retailer. Such a deal is easier said than done, however, because e-commerce tenants have very specific requirements.

Here are the top five property attributes desired by e-commerce tenants.

Be accessible: Many e-commerce tenants look for properties with manageable access. Freight trucks and other delivery vehicles are a common sight at e-commerce buildings. Having the physical access for these vehicles is critical. Easy access to major highways and roadways is also plus.

Measure up: The desired size for an e-commerce building can vary from 100,000 square feet to upwards of 600,000 square feet. While e-commerce tenants want large building footprints, they also look for specific building heights in order to house equipment and inventory. Demand for increased height — typically 30 feet to 40 feet — has been on the rise over the past year or so.

Keep it open: E-commerce tenants typically look for open floorplans to provide adequate space for equipment, inventory and staff. Additionally, a square or rectangular shaped footprint is a plus to create a space that best fits the tenant's needs.

Avoid environmental liability: E-commerce tenants want to avoid liability or indemnification obligations with respect to the property, especially since the typical e-commerce use is not one to present environmental issues.

Understand property rights: E-commerce tenants usually seek to clarify that any personal property installed at their space — such as shelving or other logistical equipment — will remain their property upon the lease's expiration. Tenants want the ability to remove such equipment without being subject to the landlord's rights to ownership of it.

Landlords, however, can obligate the tenant to repair any damage to the property that may be caused by the removal of such property.

Although Connecticut is no longer in the running in Amazon's widely publicized search for a second headquarters, the state can still benefit from the rising demand for industrial real estate in the age of e-commerce.

Connecticut's central location in the Northeast and proximity to large cities like New York and Boston make it a favorable location for retailer shipping centers as long as the properties fit the tenant's requirements.

Leah C. Rubega and Thomas W. Madonna Jr. are lawyers in Hinckley Allen's real estate practice.