The COVID-19 pandemic and the shelter-in-place policies that were put in place have accelerated e-commerce growth and the need for warehouse space across the United States.
Commercial real estate services company JLL expects e-commerce sales in the U.S. could hit $1.5 trillion by 2025. That would increase the demand for industrial real estate across the country to an additional 1 billion square feet.
Prior to the pandemic, JLL attributed as much as 35 percent of its industrial leasing to e-commerce, but now, with expectations for e-commerce to grow 20 percent this year, JLL reports as much as 50 percent of its leasing activity is already attributed to related operations this year.
“Since 2011, industrial rent growth has been positive and vacancy rates have been at historic lows, providing attractive, stable, long-term returns to investors,” Craig Meyer, president of JLL Americas Industrial, said. “These solid fundamentals and the fact that e-commerce still has a long runway for growth makes industrial real estate the darling of the commercial real estate industry.”
JLL noted that e-commerce sales hit $602 billion in the U.S. at the end of 2019, according to Digital Commerce 360. Based on those projections, JLL projects total e-commerce sales could hit $1.5 trillion by 2025.
One of the fastest-growing aspects of e-commerce has been online grocery. Online grocery exploded during the pandemic, with many households experimenting with digital ordering for the first time, and surveys suggest this trend is expected to continue. JLL projects the growth of cold storage facilities alone to grow as much as 100 million square feet to keep up with overall demand.
“E-commerce has been one of the biggest game changers to supply chain management since the introduction of the world wide web and the Internet,” Rich Thompson, JLL’s global supply chain and logistics consulting leader, said. “It has fundamentally changed the way consumers buy, as well as their expectations for delivery.”