Consumer spending has been moving towards the online environment, due to the coronavirus pandemic, and shifting away from retail in-person shopping.. As online sales and shopping increases, brick and mortar stores have had to temporarily close their doors.e. Stores that are closing their doors need to expand their warehouse space to meet consumer demands amongst the pandemic.
Spike in Online Ordering
The spike in online ordering is pushing some business’s supply chains to the limit. As demands in products continue to rise which is leading to shortages. Product shortages are revealing weaknesses in their supply chain when businesses that have a limited inventory while the general public turns to online shopping in high demands. The biggest product shortage of 2020 has been toilet paper. In order for retailers to keep up with demand they need to have a larger inventory which means these retailers need a more secure supply chain, larger warehouses, and more warehouse workers . This need for more storage space is driving the nation to invest in more commercial real estate spaces such as warehouses.
From April 15 to May 14 industrial real-estate activity increased 43% when compared to the previous 30 day period. Despite industrial real-estate activity falling 29% between March 15 and April 14, in the beginning of quarantine, the total transactions for 2020 are 2.8% higher than what they were in 2019 at this time. Prior to the coronavirus pandemic, only about 35% of industrial leasing was related to e-commerce, now 50% of industrial leasing activity is linked to e-commerce.
E-commerce is becoming a more dominant share in total retail sales. Moody’s Analytics REIS, has estimated that e-commerce sales has increased from 11.4% at the end of 2019 to 16.4% in the months of March and April. This data also shows the shopping trends businesses are trying to keep up with in terms of consumer demand.
Future of Warehouses
Americans are in need of warehouse space, and this need is only going to continue to grow over time. Prologis, a real estate investment trust, says that for each $1 billion in e-commerce companies sales are going to need 1.2 million square feet of distribution space. A commercial real estate services firm, JLL, predicts that by 2025 the demand for industrial real estate could reach an additional 1 billion square feet.
Warehouses They are used by everyone in the supply chain — manufacturers, importers, exporters, wholesalers, businesses etc…. Warehouse spaces are typically big industrial buildings that businesses can use as fulfillment, storage, and distribution centers. Since the demand is increasing, businesses are trying to get more creative when meeting the demand for warehouse spaces. Memphis, Tennessee is home to a Sam’s Club e-commerce fulfillment center that was once an old Sam’s Club shopping center. “Dead malls” are also being transformed into warehouse facilities. Malls are starting to close their doors, so the current trend is to convert them into spaces that businesses can operate within. Turning commercial retail spaces into industrial warehouses is certainly an option, but that could create a plethora of new problems if in residential areas.