Booming E-commerce Sales Drive Demand for Industrial Facilities

Patricia Kirk | Jul 16, 2020 | National Real Estate Investor


Acceleration of online shopping during the COVID-19 lockdown has made companies more risk-averse in their inventory management strategies. Concerns about running low on ordered merchandise is causing a shift from “just in time” to “just in case” logistics strategies. Now, firms are increasing stock at facilities near customers to ensure timely shipping in case customers order more than anticipated.

While this new logistics approach is still in its infancy, Greg Healy, senior vice president, supply chain solutions & workforce analytics, with real estate services firm Colliers International, says “It’s impact on industrial real estate is nothing but positive.”

The increase in online shopping was happening prior to the quarantine, but the pandemic accelerated it, Healy says., For example, in 2018, 29 percent of Nordstrom sales were online, he notes, which is equivalent to sales at 146 stores, and six percent of Target’s sales were online, which is equivalent to sales at 122 stores.

“The shift to ‘just-in-case’ stock is driving industrial demand throughout the supply chain, not just last-mile,” –Steve Medwin

Phoenix-based James Breeze, senior director and global head of industrial and logistic research with CBRE, agrees. “While last-mile facilities are performing well, the bulk sector—buildings of 100,000 sq. ft. or larger—is performing the best, as many companies are looking to solidify their regional distribution capabilities and store additional products.”

The continued increase in demand is due to growth in online sales during the pandemic, Breeze adds. “Companies feel that many of these consumers will continue to buy goods online, and this will elevate e-commerce sales faster over the next few years—faster than was previously estimated. Much of the (current) demand for space is to prepare for this increase.”

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