Home » 3PL/4PL, Breaking News » e-commerce propels surge in warehouse demand

Despite the global economic slowdown, the warehouse market is growing as it continues to adapt to the rapid growth of e-commerce, according to a new Colliers report.

In its North America Bix-Box Market Report, commercial estate agent Colliers said that despite the negative impact of the COVID-19 pandemic on the US economy, demand for industrial space increased as US industrial industries maintained momentum throughout the pandemic.

“Pandemic-induced growing reliance on e-commerce retailers for basic goods fueled demand for industrial big-box product as supply chains continued to be right-sized, shifting away from ‘lean’ inventory strategies that proved sound in the past,” it said.

Colliers said that what it calls a big-box warehouse does not pertain to a “big-box” retailer, but refers to a building that might serve a retailer’s warehouse operations.

It noted that “despite the global pandemic slowdown, net occupancy gains for bulk industrial space totalled nearly 79.8 million square feet (MSF) at mid-year, up 51% over the 52.8 MSF transacted at mid-year 2019.”

The driver for this is e-commerce, which according to the U.S. Department of Commerce accounted for a total of 16.1% of retail sales as of the second quarter of 2020, up from 11.8% in the previous quarter and a record for online shopping.

Amazon is the largest purchaser, buying 26.9 MSF in the first half of 2020, “more space than they transacted in all of 2018 or 2019.” It noted that “over the next three years, Amazon is expected to occupy an additional 161 MSF.” In 2020 alone, Amazon is expected to occupy nearly 98 MSF.

And Amazon is not alone. Colliers stated that other e-commerce companies have increased the area of space they have bought in the past half-year by 50% and now account for 14.1% of space sold.

The report said third party logistics firms (3PLs) occupied the highest percentage of bulk space during the first half of the year at 23%, totaling 56.1 MSF. This was followed by general retail and wholesale firms, manufacturing companies, and e-commerce firms.

“E-commerce companies encompassed a greater percentage of occupier activity in the first half of 2020, increasing their market share by nearly 50%, followed by manufacturing firms who increased by nearly 39%,” Colliers said.

Looking ahead, Colliers said big-box fundamentals are expected to be favorable for the remainder of 2020.

“Shifting supply chain strategies with an emphasis on omnichannel diversification should keep momentum going for industrial space and increase demand for distribution hubs,” it said.

The desire to rely less on China is also a positive sign of further activity in large, big-box industrial space in North America.

Photo by Les Corpographes on Unsplash

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