E-Commerce sales continue to grow at a rapid pace and are projected to reach $2.357 trillion by 2017. Retailers strive to shorten the time frame between a customer’s online order and the arrival at their front door. Walmart upped its game recently by announcing free shipping of its online products to level the playing field with its rival Amazon. The robust growth in e-commerce sales has led manufacturers, transportation providers, distribution and fulfillment centers, and retailers to make changes in its retail logistics chain. This will have an impact on industrial commercial real estate investment according to NAIOP Research Foundation.
Walmart’s showdown with Amazon will most likely result in the need to build specialized rapid distribution centers near major population hubs. Amazon will have to respond in kind to meet new competition with the low cost leader and build facilities of its own. This will result in the need for more distribution centers and warehouses to meet the demands of e-commerce logistics for both companies.
“The industrial market expansion has been driven, in part, by the ongoing evolution of supply chains, as businesses seek to distribute goods across the country more quickly and efficiently and e-commerce is having the greatest impact on the industrial real estate industry,” reports JLL in their 2015 report on construction trends. A study by Cushman & Wakefield states that “the continuing economic recovery, the continued growth of e-commerce and a steady housing market all contributed to the lowest vacancy rates in more than a decade for the U.S. industrial market during the first quarter of 2015.” The report adds that the overall vacancy rate nationally is 6.9 percent.
The boom in e-commerce has created significant demand for new industrial space that will support a high–volume package throughput, according to the NAIOP Research Foundation. These facilities require higher ceilings, more dock doors, restrooms and mezzanines. The Wall Street Journal reports that additional ceiling heights will be needed to allow a distributor to build three levels rather than two above the ground floor to create additional room to stock, sort and pact shipments to fulfill online orders.
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