The U.S. industrial real estate sector will grow to more than 1 billon square feet by 2025, fueled by e-commerce’s pandemic boom.
In a new report, JLL said it expects e-commerce sales could hit $1.5 trillion by 2025 — which would increase the demand for industrial real estate to an additional 1 billion square feet.
The real estate services firm said that prior to the COVID-19 pandemic, about 35% of its industrial leasing activity was related to e-commerce. Currently, however, as much as 50% of that leasing activity has already been tied to the online retail industry in 2020, JLL said.
“Since 2011, industrial rent growth has been positive and vacancy rates have been at historic lows providing attractive, stable, long-term returns to investors,” said Craig Meyer, president, JLL Americas Industrial. “These solid fundamentals and the fact that e-commerce still has a long runway for growth makes industrial real estate the darling of the commercial real estate industry.”
E-fulfillment is among the most intensive uses of logistics real estate, noted Chris Caton, head of global strategy & analytics for Prologis, the largest owner, operator and developer of logistics real estate in the world.
“Prologis estimates these customers require 1.2 million square feet of distribution space for each $1 billion in sales, which means e-commerce requires three times the space as traditional through-put distribution,” said Caton.
One of the fastest-growing aspects of e-commerce has been online grocery, which exploded during the pandemic with many households ordering online for the first time. Surveys suggest this trend is expected to continue post-pandemic. JLL projects the growth of cold storage facilities alone to grow as much as 100 million square feet to keep up with overall demand.
“E-commerce has been one of the biggest game-changers to supply chain management since the introduction of the world wide web and the internet,” said Rich Thompson, JLL’s global supply chain & logistics consulting Leader. “It has fundamentally changed the way consumers buy as well as their expectations for delivery.”