We’ve acquired an approximately 45,000 square foot industrial building in Alexandria, Virginia, for a purchase price of roughly $14.1 million. Located about 25 minutes from downtown Washington, DC, and immediately adjacent to highway I-495, we believe this is an attractive location for online retail businesses seeking to efficiently serve customers with short delivery times across the national capital region.

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. 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.

This acquisition was made by the Fundrise eFund, and, in addition to the purchase price, we have budgeted for tenant improvement costs and other soft costs, bringing our total projected commitment to approximately $17.5 million.

Strategy

Value Add

Acquire real estate that needs improvements and / or lease-up

  • Risk-return profile: Moderate to high
  • Expected timing / delay of returns: Several months to a year
  • Expected source of returns: Growth with some income

More about our strategies

Note that this section is intended to provide a general overview of the Value Add 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

We made this acquisition as part of our recently announced partnership with Saltbox — a technology-driven company that provides flexible storage and warehouse solutions for other business clients, organizations, and entrepreneurs. Saltbox offers services and rental options akin to a “co-workspace,” but with a focus on industrial and warehouse solutions rather than traditional office space.

As part of our partnership, we identified this property as an excellent fit for Saltbox’s business requirements, and, following initial improvements that we will perform to the property to further optimize the space, Saltbox plans to occupy the site.

Our collaboration with Saltbox is part of a strategic shift for the Fundrise eFund, as we move away from the fund’s original focus on for-sale housing and instead prioritize industrial properties well-suited for e-commerce operations — an asset type that has shown excellent performance throughout the pandemic. Consumer preferences have shifted continuously toward e-commerce in recent years, as brick-and-mortar retail properties have suffered. In addition, as new data has shown our economy at the highest year-over-year inflation rates in roughly 40 years, we continue to believe that residential and industrial real estate assets in particular are some of the most well-positioned to hold their value in this environment.

Approximately 12 miles from Washington, DC, the property is ideally suited to perform as a last-mile distribution facility, serving customers across the broader national capital region and its suburbs, some of the country’s fastest growing areas for years. Last-mile distribution is a key and desired attribute for many of Saltbox’s clients, who use their rental warehouse space as an affordable basecamp for their business’ e-commerce delivery operations.

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.

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, both for this property itself and for the demand for Saltbox’s services, as more small companies require space from which they can conduct their business.

Overall, our goal is to operate the property over the long term with Saltbox as our initial tenant while earning regular rental income, and then eventually sell the property at a profit.

Why we invested

  • Prime location: The property is located less than a mile from I-495, with additional direct access to I-395 and I-95, all major highways in the area. From the site, delivery vehicles can reach downtown Washington, DC, in roughly 25 minutes, giving it last-mile distribution potential for a major metropolitan area.

  • 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.