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Why Distribution and Fulfillment Spaces Could Remain in High Demand

January 27, 2021

inside distribution warehouse

COVID has accelerated reliance on technology and increased online shopping, which could continue to make warehouse space a valuable investment in 2021 and beyond.

COVID-19 has created a situation where consumers spend less time in brick and mortar retail shops. Not only does fear of getting sick accompany shopping in stores, but social distancing rules are increasing wait times at some retailers, making the process inconvenient.

This trend is boosting e-commerce, as consumers don’t want to deal with the risk and inconvenience of shopping at a store. Online shopping is becoming more popular in nearly every industry, even for essential goods like groceries.

From a commercial real estate standpoint, prolonged or permanent reliance on online shopping increases the demand for warehouses and fulfillment centers. Here’s a look at what the future could hold for e-commerce and the distribution spaces that make it possible:

The trend—which predates the pandemic—should continue

First things first: online shopping isn’t going anywhere. While the early post-pandemic days could lead to an influx of consumers heading back to the stores that they couldn’t visit for some time, these same people are learning the convenience of buying remotely.

In the early days of COVID, less than 30% of consumers were buying online, according to a survey by e-commerce website PYMNTS. By as early as May 23, that number increased to over 35%. 

This 5% increase is significant because most brick and mortar shops were closed at the beginning of the pandemic, but many had reopened by May 23. Despite having the option of heading out to buy their goods, more people were still shopping online.

This shift to e-commerce had been happening for some time, but COVID has accelerated the process. And it’s likely that consumers—including and notably less tech-savvy seniors—will continue shopping online because they’ve become more comfortable with the process.

More seniors using technology helps drive a durable e-commerce trend

Seniors are often considered slower to adopt technological advancements. However, COVID made it impossible for older members of society to continue living their lives the same way, leading to an increased reliance on smartphones and the internet.

Pew Research Center reports that about two-thirds of seniors aged 65 and older now use the internet, and about 42% of these individuals own a smartphone. Digging into the numbers further, 82% of people between the ages of 65 and 69 use the internet, and 59% of them have smartphones. 

These stats show that younger seniors are adopting technology at extremely high rates, which could further the popularity of online shopping. About ten million seniors are now buying on the internet

What online shopping means for CRE

The increase in online shopping rates is good news for many retailers, but it doesn’t stop there. As e-commerce becomes even more popular, additional stores will have to join the trend or risk losing their businesses. And both new and established e-commerce companies need warehouse space and distribution centers to meet the growing demand.

As a result, such spaces—already experiencing a boom—will likely remain a solid investment moving forward as more organizations look for these building types. Additionally, there could be an opportunity to repurpose empty spaces into warehouses. Many retail and office buildings are sitting empty, so converting them into fulfillment centers could turn a challenging situation into a beneficial one for investors. 

Evaluating the e-commerce distribution center opportunity

As with any investment, there’s a risk involved when assuming that warehouse space will be a smart play. And much of the inherent value of a distribution center relies on the current and potential make-up of the space and where it is positioned, including access to highways.

It’s worth getting expert advice as the situation unfolds, including a partner who will conduct intense due diligence on a candidate property. Speaking with a professional can help ensure your space is what these retailers and their partners are looking for in distribution centers.

Morris Southeast Group is here to help as you make the most of your current and possible commercial real estate investments. We will assist as you develop an investment plan for the post-COVID world and the economic shift it brings. 

Give us a call at 954.474.1776 to learn more. You can also reach Ken Morris directly at 954.240.4400 or via email at kenmorris@morrissegroup.com.

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