Recent research from Cushman & Wakefield proclaims it’s safe to call the e-retail trends brought on by the pandemic as “the new normal” — and that means big things for industrial and logistics real estate moving forward.
The commercial real estate services firm is predicting approximately 800-850 million square feet (msf) of industrial space absorbed from 2022 to 2023, with e-commerce occupiers accounting for 35-40% of the demand. That percentage is about on par with e-commerce’s impact on net absorption last year; of the 533 msf of net absorption in 2021, 213 msf (40.0%) came via e-commerce companies, a big leap from the 28.2% share that e-retailers represented from 2016 through 2019.
Cushman & Wakefield’s forecast is buttressed by a projection of strong online sales this year following the 14.6% growth of online sales in 2021, equating to some $870.8 billion spent shopping at home. Not counting the lockdown-fueled 31.8% surge in e-retail in 2020, online sales growth has consistently hovered between 13-15% since 2014. And online sales for categories traditionally considered brick-and-mortar oriented saw some of the fastest growth rates since the pandemic began: e-commerce food and beverage sales were up 171% in 2021 compared to 2019, while online building materials and garden equipment sales were up 105% in that same period. Online sales of motor vehicles and parts were up 50% in 2021 compared to 2019.
Of course, e-commerce warehousing and logistics requires more space than traditional warehousing, with Cushman & Wakefield reporting the “sweet spot” for such facilities at 500,000-1,000,000 square feet. With available Class A inventories historically tight, rent trajectories are expected to stay pointing starkly upward in the near term, even with much new supply expected to be delivered in the next two years. Cushman & Wakefield expects warehouse and logistics rents to grow by more than 15% over the next two years, with Class A and new construction rents rising even faster.