Will the Industrial Landscape Be Able to Support E-Commerce Demands?

Will the Industrial Landscape Be Able to Support E-Commerce Demands?

Will the Industrial Landscape Be Able to Support E-Commerce Demands?

Will the Industrial Landscape Be Able to Support E-Commerce Demands?

The global consumer shift towards e-commerce is changing how both the retail and warehousing industries operate. If you’ve been keeping up with CRE news headlines of 2019, this likely comes as no surprise. From the physical location of warehouses to the demand for brick-and-mortar storefronts, this trend is impacting nearly every aspect of our industry.

In the past year alone, e-commerce makes up roughly 11% of all retail sales in the United States. What’s more, experts are anticipating an increase to nearly 14% by 2021.

With growth rates this high, the industry is forced to look to the future and ask key questions. Since e-commerce is showing no signs of a slow down, can the industrial real estate landscape support the growth of e-commerce?

Growth of the Supply Chain

To understand how the industrial landscape is impacted, we have to look at how this growth in e-commerce has impacted the supply chain.

As the delivery wars rage on, contemporary e-commerce hangs its hat on being able to offer a myriad of choices, crazy-fast delivery, and flexible return options. In fact, most major e-commerce retailers are now offering next-day (if not same-day) delivery to major metros across the country.

This race has put new, unprecedented demands on the supply chain and has driven demand for industrial real estate — not only for more space but also for newer assets in untouched locations with premier technology. In order to keep pace with retail, the modern warehouse needs to be closer to consumers and also considerably bigger than what we saw in the early 2000s.

In fact, several sources indicate that the average new warehouse in the U.S. has increased by more than 100,000 sq. ft., a whopping 143% when comparing the development periods between 2002-2007 and 2012-2017. These new requirements are changing what the baseline industrial property looks like, how it operates, and also how CRE investors are navigating the market.

Las Vegas’ Industrial Boom

As the country’s industrial real estate expands in size and flexibility, the Las Vegas warehouse market is definitely one to keep an eye on. According to NAI Vegas’ 2019 Midyear Commercial Real Estate Report, the Vegas area is a hotspot for the industrial scene.

The stats demonstrate the sector’s high demand in the Las Vegas area with recorded vacancy rates as low as 4.3%. Warehouses around the Las Vegas metro area are not staying on the market for long and buyers’ competition is peaking as the volume of available spaces begins to dwindle.

However, the low vacancies aren’t necessarily resulting from a small supply. On the contrary, warehouse construction in and around Las Vegas is expanding at unrivaled rates — specifically in the Northern areas of Speedway and Henderson. The 2019 midyear report calculates over 4 million square feet of newly built industrial space added to Vegas’ warehouse arena.

If you think that’s a lot, get ready for more. Since then, the numbers have only kept growing. At the time the Midyear Report was compiled, an additional 3.7 million square feet of industrial space was currently under construction. In total, Vegas added more than 7 million square feet to its industrial collection in less than a year.

The numbers don’t lie. Taking a closer look at the data makes it clear that the demand for Las Vegas industrial assets is soaring. Low vacancy coupled with millions of added square footage to the metro’s warehouse scene means that industrial investment rates are tremendous. This marks huge gains for those savvy enough to get in now.

Taking a Closer Look: the Relationship between E-Commerce and Industrial

While the quantity of Las Vegas’ warehouse spaces is surging, quality isn’t being overlooked.

New warehouse developments all around the country are being designed with the future in mind. The latest and greatest trends in logistics and technology are being incorporated to facilitate the expected surge of business predicted for 2020 and beyond. It’s impossible to deny the connection between e-commerce and the expansion of industrial real estate. The only way for e-commerce to continue its upward trajectory is for the global warehouse scene to step up to the plate.

In the US alone, developers and investors have already picked up on this relationship and began moving into action. In terms of ‘instant’ shipping and last-mile deliveries, e-commerce demands a lot from industrial. This CRE sector is increasing its bandwidth to make it all happen, which results in a huge spur of industrial demand all around the country — especially near popular metros like Vegas.

The forecast for e-commerce doesn’t call for the online shopping revolution to die out anytime soon, meaning that commercial real estates’ industrial sector is expecting big business. Amid these massive expansions, the Las Vegas market is flexing its muscles and getting ready to carry the weight.