Demand for Industrial-Logistics Space is Growing, Thanks to E-Commerce

Distribution Center

Robust demand from e-commerce and third-party logistics companies for warehouse and distribution space continues to reshape the industrial market.

For years, internet retailers have been a threat to brick and mortar retailers, but the upside to the presence of the e-commerce boogie-man is a huge boom in the warehousing market. These internet retailers have been buying and leasing record amounts of warehouse space to meet the logistics demands for quick delivery of they goods they sell online. 

While development and construction of new commercial real estate in general—office, manufacturing, warehouse and retail—continues to be a powerful contributor to the United States and individual state economies, demand for industrial-logistics space grew 21 percent year-over-year, with this past first quarter being “one of the strongest opening quarters in 15 years,” according to commercial real estate firm CBRE.

Class A warehouse space is the strongest part of the market, says CBRE, and  although big players in the e-commerce industry are buying space, most of the new construction is speculative, with developers eager to take advantage of the strong demand helping to narrow the gap. Demand, however, is still outpacing supply by a lot.

While the warehouse segment is strong throughout the country, markets with the largest declines in commercial space availability in the second quarter were West Palm Beach, FL, Newark, NJ, Memphis, TN, Tampa, FL, Jacksonville, FL and Detroit, MI. 

Sources  “E-commerce helps warehouse markets thrive,” Scotsman Guide, July 22,2016 Randyl Drummer,  “NAIOP, AIA Issue Separate Forecasts for Accelerated CRE Construction Through 2018,” CoStar, July 20, 2016 Dees Stribling, “Economy Watch: NAIOP Report Details CRE Contributions to Economy,” Multi-Housing News, July 20, 2016 Mike O’Brien, “Ecommerce Growth Leading to Tighter Distribution Center Availability,” Multichannel Merchant, July 21, 2016

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