CBRE recently released a report titled E-Commerce and the Changing U.S. Industrial Landscape, in which they explain how increasing demand from the e-commerce sector for new, “big-box” facilities is reshaping the U.S. industrial market. The result of the increased demand is a strong leasing market for Class A space and build-to-suit developments, and has prompted the return of speculative construction.
E-commerce demands fuels Industrial Real Estate Market Boom
As per Scott Marshall, Executive Managing Director for Industrial Services, Americas, CBRE, “Demand from e-commerce companies has played a leading role in the recovery of the U.S. industrial real estate market over the past two years. During the first quarter of 2014, virtually all U.S. markets were buoyed by strong demand for distribution space from the e-commerce sector. Supply chain demand was centered in major inland and coastal port markets, resulting in strong absorption and shrinking availability in markets such as Atlanta, Chicago, Miami and Houston.”
Due to the limited availability of big-box facilities there is now a supply and demand imbalance in the industrial Class A market. In response, developers are signing build-to-suit deals at rates unheard of since prior to the recession, and building has already begun on approximately 45.7 million sq. ft. of speculative development. However, with estimates of current e-commerce requirements in the range of 30 million sq. ft. and the fact that e-commerce demand is still climbing it remains unlikely that supply will catch up to the demand anytime soon.
By 2017, online sales could be 10% of all retail sales
Head of Supply of Chain Services at CBRE Adam Mullen put it this way, “By 2017, online sales could account for more than one-tenth of all U.S. retail sales, up from 6.2% in 2013. To keep up with growing demand, e-commerce companies and, increasingly, traditional retailers are making major investments in big-box facilities that function both as warehouses to store goods and distribution centers to fulfill online orders.”