Living in the age where everything is being digitized has changed our ways of living, especially our shopping. The birth of e-commerce has overhauled the global shopping lifestyle. Because of this, it grew so powerful that it now affects the industrial real estate industry.
The barometer to which an e-commerce business measured is their speed of shipping and delivery. For an e-commerce business to attain the fastest delivery time possible, strategies like placing an abundant stock of products to warehouses situated in the proximity of their customer base are implemented. Tactics like this are critical to satisfying customer expectations which build and influence their public image.
It’s because of that reason that the correlation between e-commerce and industrial real estate was established. And with experts seeing that there is no stopping the growth of e-commerce, the power it holds over the demand for industrial properties will remain. If you’re a businessman planning to enter e-commerce or industrial property selling, then this article should help you out. Here’s how e-commerce shapes industrial real estate demands.
Intense competition for suitable properties contribute to the scarcity
The boom in e-commerce over the course of recent years has driven demand for industrial properties located in or near metropolitan population centers. This resulted in historically low vacancy rates and higher cost of rent for industrial properties in the United States. In turn, this caused an abundance of investment activity in the industrial real estate sector that led to intense competition for scarce industrial properties.
Having a commercial warehouse in the densely populated urban areas allows retailers to meet today’s customer expectations in terms of delivery speed. The problem that e-commerce businesses face is the lack of available warehouse space in those areas. Today’s warehouses take up a third more space than they did back in 2009 and tripled in volume compared to the numbers before the new millennium began.
Increasing demands lead to efforts to maximize land
Due to the increase of demand and the lack of suitable warehouse facilities for e-commerce to fulfill customer expectations, industrial real estate property developers have moved to repurposing and constructing vertical warehouses.
Aside from the lack of area, there are also existing warehouses not suited for the fast-paced orientation of e-commerce businesses. They can be too small, have low ceilings, possess inadequate dock infrastructure, or don’t have durable construction to support substantial floor loads. These properties are also often confined by zoning laws and practical considerations to industrial areas within the urban periphery that also makes them unsuitable to meet the demands of e-commerce.
Hence, new warehouses that are large in height were constructed. The average height of new warehouses increased to 3.7 feet in the U.S. compared to warehouses developed between 2002 and 2007. The robust demand for warehouse and distribution centers also drove the retrofitting of properties in urban locations like abandoned schools and government buildings. The industrial sector is quick to pick these properties up to rezone them in order to meet the demand from e-commerce.
Takeaway
As the market continues to adapt to the ever-growing demand from the e-commerce sector, typical warehouses are not going to cut it. This is shaping up to require more resourcefulness and increase the modernization of new facilities in order to keep up with the current consumer habits and expectations.