E-Commerce's Impact on Industrial Real Estate Demand

As e-commerce continues to grow and change, so too must the modern warehouse. Today, the online sales industry accounts for nearly 9 percent of total retail sales in the U.S., and has been growing three times as fast as brick-and-mortar sales since 2010. As such, there’s been a major impact in the way goods get to consumers.

Some of the benefits of shopping online are a nearly endless number of products to peruse, fast delivery and flexible return options. Due to the increasing ways in which consumers can shop and receive online purchases, the traditional supply chain has had to readjust and has driven demand for industrial real estate to nearly unseen levels.

With so many ways to get products to consumers, e-commerce supply chain operations require more warehouse and logistics space—typically three times more than a traditional brick-and-mortar supply chain. A recent CBRE Research study found that for each incremental $1 billion in growth in e-commerce sales, there needs to be an additional 1.25 million square feet of distribution space to support the channel growth.

But not all demand is created equal. E-commerce supply chain needs efficient logistics space that facilitates quick movement of goods to consumers. After all, with more and more major omnichannel retailers offering two or even one-day shipping, goods need to be moving through the process as quickly as possible.

To enable that, new warehouses are larger not only in footprint, but in height as well. The average new warehouse in the U.S. increased by 108,665 square feet in size and 3.7 feet in height, compared to similar warehouses developed between 2002 and 2007. Distribution markets that serve major urban centers and have land for new warehouses, such as Atlanta, Cincinnati and the Inland Empire in Southern California, saw building sizes increase the most.

As e-commerce sales continue to take up more of the retail pie, markets lacking sufficient modern logistics facilities will capitalize on expansion potential to keep up with the growing demand.