E-Commerce Boom Means Warehouses May Be In High Demand In Upcoming Years

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Online shopping was already a massively popular choice for Americans compared to traditional in-person shopping. Now, with the COVID-19 pandemic shutting down many of these in-person storefronts, shoppers were left to turn to online options for their needs. This has created a huge boost to the already-growing e-commerce sector.

In fact, according to commercial real estate services firm JLL, demand for industrial real estate could reach an additional 1 billion square feet by 2025. Prior to the pandemic, the firm said that 35% of their leasing activity was tied to e-commerce. Now, that number has shot up to 50%. Craig Meyer, the president of JLL’s Americas industrial division, said that the first quarter was “our largest leasing quarter in three years.” In fact, the pressure on e-commerce companies to fulfill consumer demand has been larger than it usually is during the holiday season.

In particular, fresh items have been some of the most ordered by customers who either can’t or don’t want to risk going to the grocery store. Meyer noted a recent situation where a retail company requested a lease for a 1.2 million-square-foot warehouse in Delaware and moved in less than 30 days, which Meyers said was “unheard of.” Typically, it can take up to nine months for a company to fully move into a leased space.

Prologis, the real estate investment trust which is also Amazon’s largest landlord, estimates that e-commerce companies will require 1.2 million square feet of distribution space for each $1 billion in sales. Predictions by firm eMarketer estimate that U.S. e-commerce sales will make up about 14.5% of total retail sales, or $709.78 billion by the end of the year. By 2024, these sales may even pass $1 trillion for the first time. Compared to office, retail, and hotel space, it’s clear that industrial real estate will be the most in-demand sector of the commercial real estate market going forwards.