The coronavirus global pandemic brought a whole new level of growth in the industrial real estate industry, thanks to the online purchase of those people stuck in quarantine. Because of this unexpected boom, demands for warehouse facilities also increased. But with the lack of available spaces, businesses get a little creative and find ways to store everyday loads of parcels.
The e-commerce business worldwide has seen record-breaking sales growth due to numerous digital sales transactions daily. To avoid delivery delays and keep up with the influx of online orders, companies race like rats in securing the biggest and most convenient warehouse space near residential areas.
According to the CBRE, the demand for industrial facilities like warehouses or distribution centers with at least 200,000 square feet hit a record high in North America since last year.
The commercial real estate services firm data shows that in 2020, the transactions for warehouse spaces reached a total of 349.3 million square feet - a 245% jump from the data recorded in 2019.
A CBRE Group also reported that New York City's industrial real estate recorded a solid first quarter in 2020. All thanks to the demand for third-party logistic business space and storage for retailers.
Although the city has become the epicenter of the COVID-19 pandemic, the quarterly leasing velocity for warehouse and distribution properties was still high. The report shows the industrial space availability remains at 8.5% while the industrial site vacancy decreased by 5.1
SWANSEA, WALES - NOVEMBER 26: Staff at the Amazon Swansea fulfilment centre process orders as they prepare for what is expected to be their busiest Christmas on record on November 26, 2010 in Swansea, Wales. The 800,000 sq ft fulfilment centre, the largest of Amazon's six in the UK and one of the largest in the world, is gearing up for 'Cyber Monday', which this year is Monday December 6, and is predicted to be the busiest online shopping day of the year. In 2009, Cyber Monday saw 2 million orders received at a rate of 23 orders per second.
No Warehouse, No Problem
With warehouse buildings getting occupied every day, companies and their brokers need to think "outside the box" to keep their deliveries flowing.
Just like how Amazon recently transformed an old gold course into a distribution center. According to CNBC, the online retail company found an abandoned 18-holes golf course in Clay's town in New York City. They converted it into a $350 million worth distribution center. Amazon is planning to do the same thing on the top portion of a former golf course in Alcoa, Tennessee.
The e-commerce giant also converted an old and non-operation mall into a warehouse space. Vacant offices could also see the same fate as the former gold course.
CBRE executive vice president Mindy Lissner said that vacant office buildings are also becoming an attractive space to flip into a warehouse facility. She said that should businesses continue to implement remote work for their employees even after the pandemic, most office spaces could end up on the warehouse market.
Post-Pandemic Demand
While it is safe to assume that the e-commerce growth will likely slow down this year as people feel safer to go out and shop in stores again, experts suggest that the industrial spaces will not feel it and will continue to be a competitive market.
"We're really just seeing the tip of the iceberg as far as demand and growth of e-commerce," Lissner said, as reported by CNBC.
"The pandemic has had a huge impact on the growth of demand of warehousing and fulfillment. But it was already growing anyway... And the trend is going to continue," she added.
READ MORE: Covid-19 Aftermath: Post-Pandemic Office Space Design Will Be Revolutionary