Industrial Real Estate - E-Commerce Expected to Drive Demand.
Updated: Dec 2, 2019
Historically, the manufacturing and retail sectors have driven demand for industrial real estate. However, the world of industrial real estate today is consumed by the conversation about e-commerce, last mile delivery and supply chain logistics. And rightly so. The double-digit growth in e-commerce and same-day/next-day delivery services is directly impacting industrial lease rates, land pricing, and development costs in every city. As you can see from the map below, over the last 10 years changing consumer preferences and expectations has changed supply chain models and forced them to become more efficient. Further driving demand for industrial space, is, as outlined in a 2019 report published by Deloitte, the fact that customers are three times more likely to return products they bought online versus those they bought at a retail store. This means that e-commerce companies typically need 20% more space to manage such reverse logistics compared to traditional retail companies. In addition, with e-commerce sales expected to grow at 15 percent annually, reaching 14.8 percent of retail sales by 2023, the need for warehouse space to manage the product return element of e-commerce will further drive demand.