With online shopping accelerating in the pandemic a space race is now on for building warehousing facilities to sustain the rapid growth of ecommerce companies, CNN reported. Former golf courses, office buildings, vacated shopping malls were all getting snapped up in the big push for space to service online orders.
Online Retailers In Race For Warehouse Space To Service Orders
According to commercial real estate services firm CBRE, demand for big-box, industrial facilities- distribution centers or warehouses of 200,000 square feet or more rose to a record high in North America last year. With transactions for the spaces totaling 349.3 million square feet in 2020, it saw a nearly 25% jump from 2019, CBRE said.
According to commentators, the pace of e-commerce growth would likely slow in 2021, with people returning to malls and stores, but the market for industrial space would remain competitive.
Mindy Lissner, a CBRE executive vice president said it was just the tip of the iceberg as far as demand and growth of e-commerce was concerned. She added once one started it one figured out how easy it was to order things online.
She added, the pandemic had had a huge impact on the growth of demand of warehousing and fulfillment, but the growth was there in the first place and the trend would continue.
The rising demand coupled with lack of industrial space had businesses and brokers resort to some creative initiatives. Amazon recently took over a shuttered golf course in Clay, New York for building its distribution center. It has also set its sights a portion of a onetime golf course in Alcoa, Tennessee.
Defunct, old malls too were in the shopping list of the e-commerce giant for warehouse space. There were plenty of those in the US, which made ideal places for locating warehouses given their proximity to communities full of paying customers. But developers faced issues related to rezoning.
Lissner added vacant office buildings were being increasingly targeted for warehouse space. With sprawling campuses, convenient locations and many with easy highway access to boot they were especially well-suited for the warehouse makeover. More office space may be expected to make it to the market, if businesses extended remote work policies following the pandemic and cut space for employee cubicles.
Experts also point to the movement away from conventional warehouse locations, distant from customers to neighborhoods and next block addresses. The trend was starkly evident in New York, where companies were building up rather than out. Some had moved into multistory buildings and converted them into vertical warehouses.
According to Chris Caton, managing director of global strategy and analyst, Prologis, a real estate investment trust, their customers preferred more expensive real estate. Caton added, they no longer wanted to move into really remote locations, like Indianapolis, Columbus or Memphis rather much of that demand especially in the rent growth in its business in the last decade, had focused around 24-hour cities.
According to Prologis, owner of warehouses and Amazon’s biggest landlord, for every $1 billion worth of sales, e-commerce companies required 1.2 million square feet of distribution space.
During a CBRE virtual event Lissner said that discount retailers like Burlington, Ross Stores, TJ Maxx, home improvement and home goods stores like Wayfair and Home Depot; as also meal-kit companies and grocers, had especially high demand for warehouse space.
But demand was everywhere one could see, according to commentators.
In February Gap announced a $140 million investment for the construction of a distribution center in Longview, Texas. The announcement comes as the company looks to ramp up its online business 100 % in the next two years. The 850,000 sq ft facility, would on completion be able to process 1 million packages daily.