Infill Industrial Properties to Prove More Valuable, Successful than Greenfield Counterparts
- Jun 29, 2010
June 29, 2010
By Barbra Murray, Contributing Editor
Investors take note: In terms of occupancy levels, rental growth and financial returns, industrial properties in infill locations are superior to those in greenfield locations, AMB Property Corp. asserts in its new AMB Infill Strategy report.
It’s a reversal of a trend. In the 1990s, lower fuel costs and greater land availability lured industrial center occupants and developers to greenfield sites. But the tide has turned. With the emergence of complex and increasingly global supply chains, urban or more developed locations have become especially desirable.
“Critical to competitive positioning is having the right items at the right time in the right place,” AMB notes in its report. “This translates to locating near population centers, as well as mitigating costs and improving service levels.”
AMB’s contention that a long-term infill strategy will prove more successful than a long-term greenfield strategy is supported by the numbers. As per the report, over the last decade, infill submarkets have had an occupancy advantage of more than 300 basis points over greenfield sites, and a 220 basis points return premium, and rent growth has been far superior with an annual total return premium of 220 basis points.
And, despite the “green” in greenfield, infill submarkets come out on top in terms of sustainability. Carbon emissions are 23 percent lower when using infill industrial properties as opposed to greenfield properties, and supply chain emissions at urban sites can be lowered by as much as 30 percent. Additionally, infill locations provide a 22 percent lower average supply chain mileage compared to greenfield locations. With companies becoming increasingly environmentally conscious, infill sites present yet another advantage, an advantage that will be in demand for the long-term. “We expect recognition of the environmental and social costs of transportation to continue, and that over time it will drive demand to demonstrably more sustainable locations,” AMB notes in the report.
David Twist, AMB’s Vice President of Research, said in a prepared statement, “Our research concludes that for industrial property owners and developers a comprehensive infill strategy is good for business while at the same time good for society and the environment.” Twist co-authored the report with Aaron Binkley, AMB Director of Sustainability Programs.