The Increasing Influence of E-commerce on Industrial Real Estate

The E-commerce Boom and Industrial Real Estate

The rise of e-commerce has led to increased demand for warehouse space as businesses scramble to store and manage their inventories. Online retailers require substantial storage for their goods, as well as strategically located distribution centers for efficient delivery. This has led to increased demand for industrial properties in prime locations and is driving up rents and prices.

Impact on Location Preferences

Previously, industrial properties were typically located on the outskirts of cities due to lower land costs. However, e-commerce is changing this trend, with businesses now seeking more centrally located warehouses. The reason is simple – speed and efficiency of delivery. As consumers demand faster delivery, businesses are forced to move closer to their customer base, driving demand for urban industrial properties.

The Rise of the ‘Last Mile’ Facilities

The ‘last mile’ of delivery – the final step in the process that brings items to consumers’ doors – has become a critical factor for e-commerce businesses. To minimize delivery times, more companies are investing in ‘last mile’ facilities. These are smaller distribution centers located close to dense urban areas, allowing for quicker distribution of goods. This trend is opening up new opportunities within the industrial real estate sector.

The Need for Advanced Facilities

E-commerce operations are not just about space – they also require sophisticated facilities. Many online retailers use automated systems and robotics to manage their inventories, requiring warehouses with specific infrastructure. This is leading to a rise in demand for advanced, high-tech industrial properties.

Investing in E-commerce Driven Industrial Properties

Investors looking to capitalize on the e-commerce boom should consider industrial properties with key attributes. These include properties in strategic locations close to major transport routes, properties with ample space for storage and sorting, and properties equipped with modern infrastructure that can support sophisticated logistics operations.

• The U.S. industrial real estate sector grew by 15% in 2020, largely driven by the e-commerce boom.
• Warehouses and distribution centers accounted for 60% of all industrial property purchases in 2020.
• It’s estimated that every $1 billion in e-commerce sales requires 1.25 million square feet of distribution space.
• Major e-commerce companies are investing billions in logistics real estate. Amazon alone leased more than 60 million square feet of industrial space in 2020.
• E-commerce is expected to account for 20% of all retail sales by 2022, further driving demand for industrial real estate.

In conclusion, the e-commerce boom is reshaping the industrial real estate landscape and creating new opportunities for investors. Rapid growth in online shopping is driving demand for warehouses and distribution centers, particularly in urban areas close to consumers. As this trend continues, we can expect the industrial real estate market to continue evolving to meet the specific requirements of the e-commerce industry.