3 MIN. READ
As the online economy takes hold, retail space has begun to rapidly rescind its grasp on the CRE market. Supply-chain economies and high demand for industrial and warehouse space near urban populations continue to drive the industrial sector of the commercial real estate (CRE) market into 2020. Year over year as the digital age advances, there is still no sign of a reversal in this trend.
The industrial sector and e-commerce influence are continuing to expand their foothold, and big-box stores are continuing to trade in their retail centers for industrial spaces. According to CSCMP’s Supply Chain Quarterly, the industrial sector has expanded in the U.S. for the past 38 consecutive quarters, and vacancy rates are at historic lows.
The U.S. Census Bureau reveals that e-commerce sales continue to grow annually, and as the landscape of retail versus e-commerce markets continues to shift in the U.S., the demand for warehouse space continues to be driven higher. According to Deloitte, by 2023 the real estate demand for industrial spaces is expected to increase by 850 million square feet.
An expanding sector
As the U.S. economy continues to expand, the industrial sector of the CRE market will expand in kind. Though expansion may slow as a result of uncertainties in the markets, trade wars and elections, investment volumes continue to remain consistent. The economy forges along in its upward growth, and 2020 bodes well for industrial CRE expansion.
The influence of e-commerce
E-commerce is an enormous driver of industrial CRE demand. As e-commerce expands its influence and sales numbers continue to increase by leaps and bounds, the industrial market has continued to displace physical retail spaces. The retail sector has begun a slow decline, struggling as new vendors take to the digital age of commerce and the retail spaces of yesteryear lose their luster.
E-commerce providers are pushing out brick-and-mortar sales floors, and warehousing is taking a fast hold of the industrial CRE market. Plenty of vendors are at the forefront of the industrial era, including cloud computing companies and e-commerce providers who need ample fulfillment centers and storage spaces for their online wares. Just as Netflix eclipsed Blockbuster, the writing is on the wall for many traditional big-box retailers.
The effect of e-commerce inflation is twofold: Retail spaces are no longer required to invite customers in to shop, and those spaces are now in high demand. Goods are now being delivered directly to the customers from behemoth e-commerce sites like Amazon and big-box stores that are rising to the challenge of survival in a digital age, such as Walmart.
Goods and services are no longer at the mercy of an in-person audience. Delivery has taken the work out of purchasing all types of products, and the demand for this type of service is growing. The trend toward e-commerce delivery has fueled the transition from retail to industrial CRE, and there is no shortage of demand for this type of real estate. E-commerce penetration will continue as demand for new facilities remains strong and the industrial CRE market experiences healthy, sustained growth.
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