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  • CBRE Forecasts Online Returns To Hit Record $70 5B This Holiday Season

CBRE Forecasts Online Returns To Hit Record $70.5B This Holiday Season

Dallas, TX | December 15, 2020
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Analysis by CBRE and Optoro shows rapid e-commerce expansion leads to more holiday returns; more warehouse space needed for reverse logistics; Product waste remains a problem

 

Dallas – December 15, 2020 –Record e-commerce sales will drive more returns of goods bought online this holiday season than ever, stressing supply chains and increasing demand in the already tight industrial real estate sector, according to a new report from CBRE.

 

According to CBRE, e-commerce returns this season could total as much as $70.5 billion,a 73 percent increase from the previous five-year average. This increase can be attributed to a historic rise in e-commerce sales triggered by the COVID-19 pandemic.

 

CBRE’s forecast, based onNational Retail Federation data,estimates online purchases this holiday season (November and December) will reach $234.9 billion, a year-over-year gain of 40 percent. With an average return rate of 30 percent for online purchases, it’s easy to see why the overall number of returns will jump significantly.

 

“Given the increased reliance on e-fulfillment during this pandemic, the holiday strain that is placed on company-controlled and third-party supply chains will be even greater,” said Travis Sapaugh, Senior Vice President with CBRE in Dallas. “Reverse logistics has been challenged to keep the same pace with return orders in recent years, and they will really be put to the test this year. The hope is that companies that are in demand, or continue to be in demand, have already underwritten these costs and capacity needs into their holiday fulfillment strategies.”

 

“Online returns continue to be a challenge and this year reverse logistics operations could be stressed like never before,” said John Morris, Industrial & Logistics and Retail Leader for CBRE. “With fewer in-store sales this holiday season, retailers will have to shift much of their focus to returns processing and their distribution networks in order to recoup as much value as possible.”

 

Impact on Industrial and Logistics Real Estate

 

Optoro, a provider of returns technology and services for processing retail returns and CBRE’s partner for the report,estimatesa reverse logistics supply chain requires, on average, up to 20 percent more space and labor capacity compared with forward logistics (the original order fulfillment process)—a conundrum given thatindustrial space is already incredibly tight:

 

  • As of the third quarter, there were 22 U.S. markets with vacancy rates below the national average of 4.7 percent, according to CBRE.
  • CBRE Economic Advisors estimates 1.5 billion sq. ft. of industrial space will be added in the U.S. in the next five years to meet growing demand.
  • Many companies that currently occupy second-generation space are expected to upgrade to these newly constructed buildings, which will allow reverse logistics occupiers to lease a greater portion of Class B space. As much as 400 million sq. ft. of this space could be used to process returns in this five-year period.

 

Not all returns can be successfully discounted and put back in rotation. Optoro estimates that returnsproduce 5 billion pounds of waste in landfills annually.

 

“Retailers will have to meet this growing challenge in many ways,” Mr. Morris said. “More space will be required for distribution networks. However, cutting down on the overall return rate should be a paramount goal going forward. Technologies such as virtual sizing and augmented reality can help provide more accurate product assessments, allowing consumers to make more informed decisions and reduce returns. Innovations like this will help retailers limit their losses and cut product waste – a win-win for everyone.”

 

To download the report, click here.

About CBRE Group, Inc.
CBRE Group, Inc. (NYSE: CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2020 revenue). The company has more than 100,000 employees serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.

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