While e-commerce replaces shop floors with webpages, its physical real estate needs are still enormous. Warehouses, distribution and fulfillment centers and other industrial properties are critical to meeting our increased demand for goods delivered rapidly to our front doors. The pandemic has increased the extent of business-to-business and business-to-consumer e-commerce activity. For example, consumers have taken to purchasing things online that they previously were reluctant about, such as perishable goods and furniture.
Globally, e-commerce sales accounted for 18% of total sales in 2020 and are expected to account for over 25% by 20254. In the US, the equivalent figures are 20% and 25% – figure 1 in the download below.5 This rapid growth has increased global demand for regional distribution centers and enhanced “last-mile” bases for same-day or next-day delivery. Demand for US warehouse and distribution centers is expected to surpass 1 billion square feet by 2025 (92,903,040m²) as operators try to reduce delivery times and get even closer to customers in dense urban environments.6 This incremental need equates to approximately 10% of the 10 billion square feet of warehouse and distribution centers currently available in the US.
This unprecedented expansion is due partly to online order fulfilment requiring more logistics space. With e-commerce, 100% of inventory is stored in warehouses, rather than some on store shelves and in backrooms. This feature allows for greater product variety, deeper inventory levels, space-intensive parcel shipping operations and value-add activities such as processing returns. As a result, it is estimated that e-commerce requires three times more industrial warehouse square footage than traditional brick-and-mortar retail to fulfill orders. US cities in the Sun Belt such as Savannah, Austin, Phoenix, San Antonio, Charleston and Charlotte have seen the fastest acceleration in new development as a percentage of existing stock over the past year.
Source: https://www.privatebank.citibank.com/outlook/reshaping-real-estate?gclid=CjwKCAiAz–OBhBIEiwAG1rIOrh0cG0QoZ5PFyBN1jQppu4o0xjdzktPwEsHLpfHxQBRUw-jXDEtGxoCOl8QAvD_BwE
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