The U.S. may need another billion square feet of warehouse space by 2025

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With the proliferation of online sales during the coronavirus pandemic, the United States will need more warehouses to store heaps of boxes and manage these orders.Terred at home, and with many brick and mortar stores temporarily closed, buyers turned to their computers and smartphones to buy everything from fresh groceries to new home furnishings and pet toys. company. And even after the pandemic ends, the trend for people to buy more and more online is likely to continue.

And so with more people clicking “buy” instead of venturing into the mall, demand for industrial real estate could reach an additional 1 billion square feet by 2025, according to a new report from JLL.

The commercial real estate services company said that before the Covid-19 crisis, about 35% of its industrial leasing activity was related to e-commerce. But now, he says, up to 50% of this leasing activity has already been linked to the online retail industry in 2020.

“The first quarter was our largest rental quarter in three years,” said Craig Meyer, president of JLL’s industrial division for the Americas. “We are seeing increased pressure on [e-commerce companies] than the typical holiday season … to meet consumer demand. ”

He explained a recent situation where a retail company asked for a lease on 1.2 million square feet of warehouse space in Delaware about 30 days ago, and moved in almost immediately to start to fulfill orders for fresh items. Part of the warehouse included a cold storage item for food that needs to be refrigerated, said Meyer.

“It is unprecedented,” he said. “The lease was signed and they moved in within 30 days. As a general rule, the agreements last for nine months, from the signing of a lease to the move, according to Meyer.

JLL predicts that the United States will need an additional 100 million square feet of cold storage just to keep up with consumer demand and sales trends.

To put into perspective the amount of additional warehouse space needed, Prologis, a real estate investment trust that is also Amazon’s largest owner, estimated that e-commerce businesses need $ 1.2 million. square feet of distribution space for every billion dollars in sales.

EMarketer predicts that e-commerce sales in the United States will represent about 14.5% of total retail sales, or $ 709.78 billion this year. By the end of 2024, that percentage will reach 18.1% of all retail sales, with online sales exceeding $ 1 trillion for the first time, he said.

Industrial real estate is the “darling” of the commercial real estate industry today, said Meyer.

The industry certainly has better prospects than some of its peers – including offices, shops and hotels, where vacancies are increasing and fewer new deals are being made.

In retail, in particular, store closings are piling up and are poised to break a record this year, prompting homeowners to find new uses for empty space. Rents are also under pressure as companies looking to keep their stores open are trying to renegotiate the deals, hoping to take advantage of the market turmoil in their favor. Former department store manager Jan Kniffen predicted that a third of all American malls would disappear by 2021. It could also hit cities that depend on their malls for tax purposes.

Warehouses could be a solution, as supply is more difficult to find.

In some cases, the dead shopping centers have already been converted into sprawling logistics centers. In Memphis, Tennessee, for example, a closed Sam’s Club store now houses a Sam’s Club e-commerce distribution center.

Still, there are hurdles to taking an old retail space and turning it into something else, warned Meyer.

“There are things like zoning laws, these are residential areas,” he said. “It will take a lot more to imagine these things. “

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