Business Trends

E-commerce Driving Demand for Industrial Real Estate, by Cushman & Wakefield

File Type: Free Content, Article
Release Date: February 2014
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With online sales expected to reach $370 billion by 2017, “the industrial real estate market will be a main beneficiary,” as those increasing sales translate into greater demand for logistics centers tailored to the needs of e-commerce. So says Cushman & Wakefield’s new “Industrial Real Estate Forecast 2014-2017,” which offers an in-depth view of industrial real estate markets in the United States, Canada and Mexico. Demand for goods from consumers and businesses is rising, meaning that manufacturing production and shipments will increase at a healthy pace, as will imports and exports. Last December, North American industrial production reached a post-recession high, and Cushman & Wakefield projects that the economic environment for the industrial real estate sector will continue to improve.

In 2013, the industrial sector experienced its strongest performance since 2005, with 328.5 million square feet in leasing activity, up 6.2 percent over 2012, and 117.2 million square feet of positive absorption, the forecast reports. With industrial vacancy rates at their lowest in five years, both build-to-suit and speculative development are on the rise, and rents are expected to go up too, albeit slowly.

The report adds that shifting transportation and location strategies will continue to affect warehouse and distribution centers, influenced by e-commerce trends as well as by inflationary wage pressures in China, the return of some manufacturing jobs to the U.S., overly risky global supply chains and the widening of the Panama Canal. Technological advances in order fulfillment are affecting the demand for warehouse space, influencing distribution center sizes and configurations as well as their locations and interior build-outs. The manufacturing sector comeback “is looking much different from past decades”; companies that “will successfully produce in the U.S. will be focused on a more skilled workforce, access to distribution channels and highly automated processes.” Demand for flex space, the forecast notes, continues to be lackluster and “will remain muted through 2014,” although stronger absorption is projected for 2015 and 2016.