The last few years have been a period of massive growth in the American industrial sector. Industrial space has been so valuable that many tenants have signed leases in anticipation of future growth, while more developers have invested in the construction of multi-storey warehouses in urban cores.
But not all industrial tenants can or want to immediately invest in large-scale warehouses and sign long-term leases. Some start-ups, for example, may wish to start with a smaller unit that matches their current volume of business and grow from there. Other companies looking to expand might also want a testing ground to play with their logistics networks. To serve this segment of industrial end-users, real estate private equity firm Capstone Equities launched its portal warehousing concept last year, a kind of flexible warehouse solution offering the smaller spaces and shared amenities. which have become common in the office coworking industry on a membership basis.
The company’s first Portal location opened this month in Salt Lace City, with 30,000 square feet of space. incubator offering spaces ranging from 250 sq. ft. to 2,500 sq. ft. in the short term. Property amenities include high-speed internet, reception services, business growth support, and community events, among other offerings. Capstone Equities executives say that of the 22 suites available at the property, 14 already have tenant commitments.
In the future, Capstone plans to expand this offer to several more cities, including Brooklyn, NY, Las Vegas, Los Angeles, and Phoenix.
WMRE recently spoke with Alex Morrison, CEO of Portal Warehousing at Capstone, about the types of tenants the company hopes to attract, the types of spaces it seeks and its vision for the future of the concept.
This Q&A has been edited for length, style, and clarity.
WMRE: What types of spaces are offered to tenants through Portal Warehousing and how do they differ from traditional warehouses?
Alex Morrisson: Traditionally, industrial space is only available in large areas (minimum 5,000 ft2) and [through] long-term leases (five years). Small spaces with flexible terms usually don’t exist, relegating growing businesses to working in garages, self-storage facilities, or corners of other people’s warehouses.
Portal institutionalizes co-storage space. We provide access to high quality space with critical logistical infrastructure to a business of any size. Spaces range in size from as small as 50 square feet up to 2,500 square feet, and everywhere in between. We allow businesses to occupy exactly the right amount of space they need today, with the flexibility to expand into more space as their business grows.
We’re reimagining what a warehouse is, bringing amenities that people are used to in coworking spaces, but don’t exist in the industry, like art, networking and collaboration space, cafes and photo booths. Portal also transforms warehouses into space for people, not just products.
WMRE: What types of businesses does it serve best?
Alex Morrison: Portal is suitable for businesses with space requirements for physical products and people. We are an ideal solution for e-commerce merchants of any size, logistics companies and growing businesses. Portal’s current customers include e-commerce merchants fresh out of their garages; established brands using the space to run their D2C operation or prototype new products; and national companies generating [more than] $1 billion in revenue per year requiring additional storage space.
WMRE: How does Capstone Equities find new properties for Portal Warehousing?
Alex Morrisson: Capstone Equities has been investing in real estate and real estate operations businesses for 15 years, with a track record of over $2.5 billion in invested capital. Capstone has extensive relationships within the brokerage community, private equity ownership groups and high net worth individuals with private portfolios which it uses to find new spaces.
Capstone also has its own balance sheet, which it will use opportunistically to acquire properties so Portal can operate. As Portal’s first locations have opened to strong tenant interest, we are seeing more and more opportunities from landlords who want to partner with Portal to fit out their industrial portfolios.
WMRE: How many portal warehouses does your company plan to open and in which markets? Why did you choose these markets? What is your timeline for opening new portal installations?
Alex Morrison: Today, Portal has two installations. Its Salt Lake City facility opened in July 2022 and its Phoenix facility opens in August 2022. Portal has partnered with large institutional landlords for the first two properties.
Salt Lake City and Phoenix were chosen for a variety of reasons, including population growth, e-commerce activity, economy, and favorable business climate. Looking ahead, Portal plans to select several new markets by the end of 2022. It plans to open 10 locations in 2023, targeting last-mile infill locations in primary and secondary markets.
WMRE: How do the square foot rates of Portal properties compare to those of traditional warehouses? What kind of rental terms does Portal offer to tenants?
Alex Morrisson: Portal offers flexible terms ranging from three months to one year. Comparing Portal’s square foot rates to traditional storage is like comparing apples to oranges. Portal’s suites range in size from 100 to 2,500 square feet, which is typically non-existent for industrial spaces. Portal memberships include access to private space and shared access to dock and level gates, logistics equipment, office space and other amenities.
WMRE: Your company also offers to help retail startups set up fulfillment operations, access the best shipping rates through its aggregated volume rates, secure new capital, and provide a mentoring. What are the additional charges for these services or are your rates all inclusive?
Alex Morrison: By bringing merchants together under one roof, we can offer everyone in our facilities benefits that are hard to replicate on their own. Currently, our services are all-inclusive and include things like shipping/receiving assistance, a network of local mentors and consultants to help start and grow a business and access to information on best practices.
Today’s e-commerce world is fragmented, and so is information about common pitfalls and best practices. We create a network where tenants can learn from each other and grow together.
WMRE: How do you market Portal Warehousing?
Alex Morrisson: Co-storage is a completely new industry. For this reason, we work hard to create brand awareness in each market. We do this by building strong connections with entrepreneur clusters, local brokers and e-commerce communities. We want Portal to become a gathering place for businesses and brands with physical products. So we organize events, invite speakers and offer our space as a meeting place for members of the community.