E-commerce accounts for almost 9% of total retail sales in the U.S. today and has been growing nearly three times faster than brick-and-mortar sales since 2010. The impact of this growth on the supply chain is profound. A hallmark of e-commerce is superior service—a nearly infinite number of choices, fast delivery and flexible return options. This pressure on the supply chain has driven demand for industrial real estate to nearly unprecedented levels and has fundamentally changed the look of the modern warehouse.
How much demand is coming from e-commerce users?
It is commonly thought that an e-commerce supply chain requires up to three times more warehouse and logistics space than a traditional brick-and-mortar supply chain. Anecdotal evidence suggests that this is true, but a recent CBRE Research study found that for each incremental $1 billion growth in e-commerce sales, an additional 1.25 million sq. ft. of distribution space is needed to support this growth. This suggests that of the 236 million sq. ft. that was absorbed in 2017, approximately 30% of it was attributable to e-commerce.
Figure 1: 1.25 Million Sq. Ft. of Industrial Demand from each $1.0 Billion in E-commerce Sales
Source: Forrester Research, CBRE Research, 2018.
How is e-commerce affecting building design?
Demand for efficient logistics space that facilitates quick movement of goods to consumers has necessitated design of new warehouses that are larger in size and height. The average new warehouse in the U.S. increased by 108,665 sq. ft. (143%) in size and 3.7 feet in height when comparing high development activity periods in 2012-2017 and 2002-2007. Distribution markets that serve major population centers and have land for new warehouses saw building sizes increase the most, including Atlanta, the Inland Empire and Cincinnati. Rapidly growing e-commerce sales are the primary driver of this trend, and markets lacking sufficient modern logistics facilities have further expansion potential ahead to keep pace with this rising demand.
Figure 2: U.S. Average New Warehouse Building Size
Source: CBRE Research, CBRE Econometric Advisors, 2017.
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