E-commerce growth has been vastly accelerated by the coronavirus pandemic and its associated shelter-in-place and work from home policies, driving firecracker demand for U.S. warehouse space that would call for an additional 1 billion square feet of space by 2025, according to the industrial real estate firm Jones Lang LaSalle IP Inc. (JLL).
Prior to the pandemic, JLL attributed as much as 35% of its industrial leasing to e-commerce, but now, with expectations for e-commerce to grow 20% in 2020 alone, JLL reports as much as 50% of its leasing activity already attributed to related operations this year, the company said today.
Much of that growth has been driven by the enormous popularity of online grocery, which has exploded during the pandemic with many households experimenting with digital ordering for the first time. Surveys suggest the trend will continue post pandemic, creating demand for 100 million square feet of new cold storage facilities to meet demand, JLL projects.
“E-fulfillment is among the most intensive uses of logistics real estate,” Chris Caton, head of Global Strategy & Analytics for Prologis, the largest owner, operator and developer of logistics real estate in the world, said in the release. “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.”
Overall, JLL predicts that U.S. e-commerce sales will jump from $602 billion for 2019 to $1.5 trillion for 2025. “Since 2011, industrial rent growth has been positive and vacancy rates have been at historic lows, providing attractive, stable, long-term returns to investors. 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,” Craig Meyer, president of JLL Americas Industrial, said in a release.