We’ve acquired a 76,500 square foot distribution center in Sterling, Virginia, for roughly $20.9 million. The property is located about 40 minutes from downtown Washington, DC, less than a mile from VA-267, which offers access to a network of major highways in the national capital region, and less than ten minutes from Dulles International Airport, one of the east coast’s largest flight hubs.

As demand for more and faster delivery continues to grow, we believe that “last-mile” distribution facilities located close to major population centers will become increasingly important for retailers.

This acquisition was made by a joint venture between two Fundrise sponsored funds, the Fundrise Flagship Fund, which invested roughly $18.8 million, and the East Coast eREIT, which invested roughly $2.1 million.

Strategy

Core Plus

Acquire and operate stabilized, cash flowing real estate

  • Risk-return profile: Moderate
  • Expected timing / delay of returns: Shortly after acquisition
  • Expected source of returns: Income with some growth

More about our strategies

Note that this section is intended to provide a general overview of the Core Plus strategy for educational purposes only, and is not meant to be representative of the specific details of any individual investment. All investments involve risk and there are no guarantees of any returns.

Business plan

Completed in 2005, the building is well-suited for a variety of industrial applications, including as a last-mile distribution facility. The location has the potential to serve customers across the Washington, DC, area, along with Baltimore and DC’s many, fast-growing suburbs such as Reston and Tyson’s Corner, which have proven to be some of the country’s fastest growing areas for years. With Northern Virginia continuing to attract high-value business — including footholds from major tech companies, such as Amazon’s new national headquarters — this section of the mid-Atlantic is expected to see continued development in the near future, both in terms of population growth and economic expansion. Alongside the growth in the area’s workforce, we expect demand for e-commerce infrastructure in the area to grow, giving well-located and accessible distribution centers like this one significant potential value.

A last-mile distribution center, also referred to as a terminal building or sorting center, acts as a handoff point to connect 18-wheeler trucks, which typically carry goods in bulk across longer distances, with the smaller vehicles that make the final leg of the journey to drop off packages at individual homes and businesses.

While it’s critical that these types of facilities are located close to major population centers and easily accessible to the major highways, the availability of industrial zoned land that meets this criteria (generally speaking) is in increasingly short supply, which we believe will help drive long-term value.

In addition, as more technology and information businesses have established themselves in the areas around Washington, the presence and demand for data centers — industrial properties housing commercial-scale databases, requiring vast amounts of space — has spiked. As a result, the value of traditional industrial properties has risen as well, as more warehouses have been outfitted to act as data center sites, becoming more scarce, or have the potential to serve that purpose in the future.

Currently, 75% of the property’s space is leased to Forward Air, a ground transportation and shipping provider, with roughly five years remaining on their initial lease term; and 25% leased to International Cellars, a Mid-Atlantic leader in wine distribution, wholesaling and imports, with three years left on their term. Our goal is to operate the property for the existing tenants while earning regular rental income, re-lease the space as necessary as the current leases expire, and then eventually sell the property at a profit.

Why we invested

  • Prime location: The property is located less than one mile from VA-267, which provides direct access to I-495 and I-270, and less than ten minutes from I-66. From the site, delivery vehicles can reach downtown Washington, DC, in roughly 40 minutes and downtown Baltimore in 75 minutes, giving it last-mile distribution potential for multiple major metropolitan centers, along with the many thriving suburbs in Northern Virginia.

  • Growing e-commerce demand: Same-day and short-term delivery is becoming not just essential, but the expected norm from customers. In order to fulfill increasing demand, companies ranging from online grocery delivery to e-commerce retailers need space in highly specific locations with access to regional transportation.

  • High-demand property type: Despite the continuing, fast growth of e-commerce delivery — a trend that was only accelerated by the COVID-19 pandemic — zoning restrictions have limited the amount of new supply of industrial, last-mile properties available. As the national capital region continues to expand, fewer industrial sites with prime locations and direct access to the area’s key highways remain available, increasing the potential value of properties like this one.

As always, if you have any questions or feedback, please visit our help center or reach out to us at investments@fundrise.com.

Additional Information: An investor in the Fundrise Real Estate Interval Fund (the “Flagship Fund”) should consider the investment objectives, risks, and charges and expenses of the Flagship Fund carefully before investing. The Flagship Fund’s prospectus contains this and other information about the Flagship Fund and may be obtained here. Investors should read the prospectus carefully before investing.