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More Warehouse Space Needed for Online Orders - Caldwell Commercial Real Estate

E-commerce companies have already been battling over modern warehouse space as B2B and B2C e-commerce continues to grow. But, now that more people are shopping from home thanks to COVID-19, the demand for these large facilities is expected to soar. 

The Need for Modern Warehouse Facilities

It’s no secret that consumers have grown accustomed to shopping online. It’s convenient and often more affordable than the alternative. But what goes on behind the scenes involves some serious logistics. 

In 2018, CBRE Group Inc. reported that 1.25 million square feet of logistics space is required for every $1 billion in annual online sales. The need for additional warehouse space is a long-term trend. What many never expected was that a global pandemic would change the face of this industry and its needs. 

COVID-19 Has Changed the Game for Retail

When non-essential businesses were forced to close in March, many e-commerce firms and brick and mortar stores began ramping up operations to meet the growing demand for home deliveries. People still need to eat, feed their pets, and handle certain business needs, and they’d prefer to do so while social distancing. 

E-commerce giant Amazon announced plans to hire 100,000 delivery and warehouse workers, and stores like Walmart and Target also plan to add to significant staff. Since social distancing guidelines have discouraged shoppers from making trips to the store, more have taken to ordering everyday items online. These are showing up at homes and businesses via delivery services or mail, and some shoppers can opt for curbside pickup. 

More Warehouse Space Needed to Support the New E-Commerce Landscape

The market has already been dealing with a shortage in warehouse space. According to CBRE, available space has come up short by roughly 170 million square feet annually since 2015. One of the challenges that e-commerce companies face is that existing space doesn’t fit their needs. 

The average age of a warehouse in the U.S. is about 34 years, and some spaces are much older. These seasoned facilities lack vital features such as multiple loading bays, high ceilings, and the larger floor space required for an e-commerce business. 

Many e-commerce operations require as much as three times more space than a traditional warehouse user. This is because the websites they service offer a wide selection of products, which must be quickly accessible. Modern warehouses are also being built closer to high population areas to allow for fast shipping and provide access to a ready labor force. 

COVID-19 has created a higher demand for certain products, particularly food and household items. The retailers, such as Walmart or Target, are going to want to have greater quantities of these items on hand to meet customer needs, which is going to drive the need for additional warehouse space, according to a recent report

In 2019, e-commerce sales accounted for about 15 percent of total retail sales. That figure is expected to jump to 39 percent over the next decade. And it could go even higher if restrictions related to COVID-19 continue into the second half of 2020. 

Caldwell Commercial Real Estate is proud to be a trusted partner for commercial real estate in Charleston, SC. If you need assistance with leasing & sales, property management, owner representation, or development services, contact us to learn more about how our combined 80 years of experience can help you achieve your goals.