The Effects of E-Commerce on the Real Estate Industry – Lee Chandler

Depending on what sector of real estate you are involved in, the rising trends of E-commerce today may scare you or you may welcome it with open arms. E-commerce over the past years has seen tremendous growth outpacing brick to mortar stores annually 3-1. As sales in the US are over $300 billion now and especially in today’s market of social distancing this number will only grow. As the online presence and omnichannel become more prevalent physical retail growth has slowed but is still increasing around 4% a year, for now. As seen in the last few months many retail stores haven’t been able to stay afloat and have gone out of business. In terms of commercial real estate, they are more on the receiving ends and can be a headache for commercial real estate owners and investors. As many huge buildings located in major cities often rent large spaces to retail spaces their valuations have begun to drop as these large spaces have a lower demand. This means that vendors need to be creative in what they want to do with their extra space and updating it for market needs. 

Now, industrial real estate, on the other hand, is getting slammed with new business each year as large e-commerce retailers need large and high ceiling new warehouses that are logistically sufficient to meet the new demand. On average, online retailers require 1.2 million square feet of warehouse or distribution center space per million dollars of online sales, and as shown above, with the US doing $300 billion in sales that is a lot of space that is growing every year. This means areas with high population density such as cities are experiencing new centers to lower the cost of moving the shipments while also new areas that were previously looked at as less high-grade land and areas to build are now being to used to construct these massive warehouses as it means lower costs for land, taxes, etc. As time continues real estate developers and owners need to be aware of the changing landscape in the various real estate sectors to be able to stay profitable and capitalize as things change. 

 

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