By James A. Schnur, CCIM
President and Designated Managing Broker
Integrated Real Estate Solutions
If there is a single piece of consistency with the COVID-19 novel coronavirus, it is that it is causing disruption across industries. Forcing countless individuals to comply with stay-at-home orders on top of factors limiting in-store shopping, COVID-19 created the perfect conditions to drive consumers toward e-commerce solutions. Almost overnight, online outlets became the primary source of shopping for essential goods, and in the U.S., the amount of essential goods being purchased has been rapidly ballooning. By the numbers, online sales increased 40% from May 26th–June 1st, compared to the number of overall online sales between Feb. 24th–March 1st, according to Signifyd, Inc.
Naturally, consumers utilizing e-commerce at increasing rates will have effects across the supply chain pipeline. Overall, e-commerce has increased the demand for industrial real estate, and warehouse solutions in general. However, due the massive spike in e-commerce adoption in the recent months, this need for warehouse space from retailers has risen dramatically. According to current research by Reuters, industrial leasing in the U.S. during the first quarter of 2020 has increased to a 3-year high, particularly as retailers are looking at last-mile solutions, overflow space for stock increases, and ways to mitigate the inventory shocks experienced at the beginning of the COVID outbreak.
In addition to increases in short-term leases for overflow warehouse space, manufacturers are seeing increases in demand for parts and goods made closer to home, to provide faster turn-around times for in-demand supplies. This has driven many manufacturers to look at ways to relocate their facilities closer to densely populated urban areas, partially in an effort to dramatically shorten the supply chain to consumers. Additionally, both manufacturers and retail businesses are taking this time of volatility to re-evaluate supply chain logistics as a whole, looking toward more technology-based solutions such as automation and drone shipment fulfillment, which would dramatically change the layout and interior requirements of commercial properties.
As the wave of these changes continues to roll onward, the effects in the wake are already being felt. The average asking price for rent per square foot of U.S. warehousing has risen by 4.8% to $7.86 over 12 months, and the demand for micro-warehouses — crucial for last-mile delivery and technology-based shipping solutions — has continued to increase according to real-estate experts. Demand for warehouse and manufacturing spaces has no signs of slowing as we enter in to the back half of the year, and all signs point to the steady rise in e-commerce continuing to escalate the interest in industrial spaces in general. Increases in online grocery orders specifically are beginning to shed light on the growing necessity for more cold storage facilities, which are in short supply at the moment. Overall, the market for industrial space will steadily maintain increased competitiveness as the COVID-19 issues continue, which means those looking to relocate or expand their current operations will need to be prepared for stiff terms, particularly in areas closer to urban areas.
More than ever before, now is the time to utilize every advantage available to find the best location and lease terms possible for your business. And the best way to accomplish this is by working with a commercial property tenant representative broker who understands your unique business needs, and the current demands of the commercial real estate landscape. If you are looking for a way to relocate or expand your business during these times, and require a professional edge to ensure you secure the perfect space to suite your business needs, consult with Integrated Real Estate Solutions, Inc.
Integrated Real Estate Solutions, Inc. provides clients with the in-depth knowledge and experience that is critical to determine the right path to your next move, lease renewal, or strategic repositioning of your real estate portfolio. Contact us or call 847.550.0160 today about your needs, and put our success to work for you