NIMBYism Meets Same-Day Delivery – Feb. 26, 2024
2023 began with Bridge Industrial going under contract to acquire Baxter International’s 101-acre headquarters campus in Deerfield, IL. By late spring, the developer withdrew its proposal to redevelop the campus as an industrial park, which local homeowners opposed, citing traffic and a higher municipal tax bill.
Most recently, Deerfield’s board of trustees earlier this month approved an amendment to the village’s zoning code to effectively ban motor freight terminals, logistics centers, fulfillment centers and facilities for truck parking or movement. “We’re making it very clear that you should be looking elsewhere rather than asking us to change our zoning to allow logistics centers,” Andrew Lichterman, Deerfield’s deputy village manager, told the Wall Street Journal.
Deerfield is hardly an anomaly. The WSJ reported, “Warehouse developers are increasingly contending with a headache that is all too familiar to residential builders: not-in-my-backyard community opposition to their projects. More local governments are restricting or even banning new logistics hubs that have mushroomed throughout the country to meet the needs of online retailers.”
Or as Seth Martindale, senior managing director in CBRE Group’s Americas consulting practice, told the WSJ, “NIMBYism is much more of an issue. People want next-day delivery but they don’t want to see a distribution center next to them.”
Industrial has been a top performer in commercial real estate for most of the past several years, thanks largely to retailers’ eagerness to grow their e-commerce operations and provide more shoppers with next-day or same-day delivery. But lately, demand for new space has subsided as consumers began returning to stores.
Construction starts have dropped sharply as higher interest rates increased costs and leasing has slowed in some markets, partly because a building boom during the pandemic produced a space glut.
Growing community opposition is the latest hurdle. It has resulted in longer delays and higher costs in places such as New Jersey and Southern California’s Inland Empire.
“It’s taking multiple years to get your project from the dirt being ready to having all the final approvals,” Vince Tibone, managing director at Green Street, told the WSJ.
Local resistance is also damping hopes that industrial conversion projects will help find uses for aging corporate campuses and empty suburban office parks, the WSJ reported. U.S. suburban office vacancy has jumped to 11.1% from 8.7% in the first quarter of 2020, while available sublease space more than doubled to 74.4 million square feet from 33.9 million, according to CoStar Group.
“Ten years ago, people would laugh at you if you said you were going to convert an office building to industrial,” said Tibone. Then, office properties were more valuable. Today, such deals “pencil economically,” but that is only if the local municipality grants the necessary permits, he said.
About a dozen conversion projects are progressing in the U.S., such as Dermody Properties’ conversion of Allstate Corp.’s 232-acre campus in suburban Glenview, IL, into a 10-building logistics facility. However, other communities are following Deerfield’s lead and nixing such proposals.
“It’s happening across the board,” said Martindale.