E-commerce boom driving demand for US warehouse space

Online retail is booming right now. There was already a trend away from brick and mortar stores towards online retail. This was accelerated by the COVID-19 Pandemic in the first half of 2020. The proliferation of online shopping means that the U.S needs more warehouse space to handle those orders.

The global lockdowns seen during the COVID-19 pandemic drove shoppers to their computers to buy everything from fresh groceries to home furnishings, toys and clothes. it is expected that even when lockdowns are eased and the pandemic ends that this trend of online shipping is going to remain.

E-commerce boom driving demand for US warehouse space

With this, there is pressure on U.S logistics and warehouse companies. Demand for new industrial real estate and warehouse space could reach 1 billion square feet by 2025 according to a new report from the commercial real estate services firm JLL.

JLL say that prior to the pandemic, around 35% of their industrial leasing business was for e-commerce related activities. This has increased to as much as 50% in 2020. Craig Meyer, president of JLL’s American industrial division, says that they are seeing more demand than the typical holiday season for warehouse space.

Companies are in a hurry too, a recent deal brokered by JLL saw the lease of a 1.2 million square foot warehouse in Delaware that was signed and occupied and filled within 30 days. This included cold-storage components for food. Charles Meyer says that this is unheard of, typically a deal like this would take 9 months from signing to moving in and stocking.

If we are talking cold storage, it is estimated the U.S needs a further 100 million square feet of cold-storage facilities to keep up with the demand.

It is being predicted that U.S e-commerce sales will account for 14.5% of total retail sales in 2020, that is 709.78 billion. by 2024 this is expected to reach 18.1% of all retail sales, surpassing $1 trillion. An industry standard is you require 1.2 million square feet for every $1 billion in sales. This puts into perspective how much warehouse space is needed.

Warehouse and cold storage space is the apple of industrial and commercial real estates eye right now. With hotels, shopping malls and office space taking a big hit, with vacancies growing and take up slowing to almost nothing.

In the retail industry, there have been more store closures in 2020 than ever before. This empty space is putting pressure on landlords to find new uses for their empty properties. As economics dictates, supply and demand have put those tenants still keeping stores open in a position of leverage to negotiate deals and obtain lower rents.

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