Are your tugger carts operating on prime real estate? E-commerce has online retailers shopping for commercial space. Duke estimates over the next few years, another 339-million square feet of industrial space will be needed.
Low Space Availability Drives Up Prices, Spurs Development
In an assessment by Morningstar Credit Ratings, trends in the industrial real estate sector point to a strong demand for warehouse space as e-commerce and manufacturing explode. This has resulted in reduced space availability, encouraging developers to create more. For every billion in online sales, over 1-million-square-feet of warehouse space is needed.
Stock from the online retail giant Amazon, with its 70-fulfillment center’s nationwide, is seeing earnings power increase with every dollar of net e-commerce sales growth. Though growth in this sector has posed challenges to the retail sector, it’s been a boon for others, including industrial REITS
This drives demand for logistics landlords who can turn ‘flex’ space into an industrial real estate goldmine. Rental space in this sector is likewise seeing an increase in rental rates and demand as vacancies dry up and e-commerce platforms expand.
Can Anything Stop the E-Commerce Boom?
The biggest threats to the e-commerce industry, and subsequently industrial real estate, outside the obvious – a highly unlikely decline in online purchases, include the very real threat of a decline in manufacturing activity. Given continually escalating tariffs, an outright trade war isn’t entirely out of the realm of possibility.
Should the sector experience a downturn, however, the supply end of the industrial real estate spigot could be turned off relatively quickly, allowing for a quick return to market equilibrium.
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