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How Ecommerce is Creating a Tailwind for the Industrial Real Estate Market: Pt. 3

September 13, 2018 2:00 PM By Faraz Memon

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Ecommerce Continues to Impact Retail Centers & Mall Real Estate

In the last two blog posts of this three-part series, we’ve been discussing how online retail has created a powerful trend favoring industrial real estate. But, ecommerce is also affecting other types of commercial real estate, too.

Last year around this time, we wrote a blog about “How Online Shopping Impacts Retail Centers & The Next Big Thing for Malls.” We shared that today’s retail landscape was changing in leaps and bounds as a result of ecommerce’s near exponential growth. Traditional storefronts were closing down at an alarming rate and were remaining vacant. In fact, entire malls were shutting down.

One year later, we’re still seeing this trend, but with additional effects spurred by the increase in ecommerce. As the third blog in our three-part series, we wanted to share a thoughtful update on how online retail sales are affecting this type of commercial real estate.

What We Saw is Still Relevant Today

Aggressive online retail growth has unquestionably threatened the brick-and-mortar market in recent years. Consumers spent more than $450 billion on online purchases in 2017—that’s 16 percent more than in 2016, and online retail is expected to continued grow 15 percent year after year.

As a result, shopping centers were—and are—seeing a shift. A more diverse range of tenants are renting up space offering community-based experiences and replacing traditional retailers. Think mixed-use destinations and convenient one-stop shopping that include office space, residential space, hotels, urgent cares, medical facilities, and recreation and entertainment such as rock climbing gyms, gymnastics facilities, restaurants, movie theaters, and laser tag.

The New Retail Store Trend

Big box stores like Target and Best Buy are also changing up their business model to accommodate for the spike in online retail sales and to compete with ecommerce titans like Amazon, according to our client Charles Mantione, Director of Financial Operations and Information Technology at Federal Business Centers, Inc. in Edison, NJ. Charles said that big box stores with say, 30,000 square feet of space—primarily dedicated to in-store retail—are now converting a third of it into warehousing to meet the demand of online shoppers and faster delivery times.  

Amazon Prime Real Estate

As you can see, the growth of online retail has had significant influence on business and real estate. From nationwide shifts in commercial properties to regional waves of change in industrial real estate, the impact is clear; to accommodate the boom in fulfilment centers, these tides of change in the industrial space are especially evident in urban areas in the northeast corridor—what we like to call Amazon Prime real estate.

So, with all this change and drive to create more fulfillment hubs, let’s start to pay attention to how much quicker we receive our online orders get to our door as well as any other real estate trends it may trigger. And if you’re seeing something, let us know! We’d love to hear your insight and include it in our blog!