Commercial Real Estate News
Global E-commerce Growth Needs 1.5 Billion Square Feet of New Distribution Space
U.S. alone needs 330 million sq. ft. of new warehouse space by 2025
According to international property consultant CBRE, e-commerce penetration is expected to grow to 26 percent of all retail sales by 2025, the U.S. will need an additional 330 million sq. ft. of distribution space just to handle the increase in online ordering in that timeframe.
That anticipated, e-commerce-generated demand for another 330 million sq. ft. of distribution space represents 27 percent of the projected overall demand for industrial real estate in the U.S. through 2025, according to CBRE Econometric Advisors. The broader category of industrial real estate includes warehouses for traditional retail distribution, manufacturing, R&D space and data centers.
CBRE forecasted the incremental demand based on its estimate that every additional $1 billion of e-commerce sales requires 1 million sq. ft. of new distribution space. According to CBRE's forecast, which is based on Euromonitor data for 2020, U.S. e-commerce sales are expected to increase $330B from 2020 to 2025. Globally, e-commerce sales are forecast to rise by $1.5 trillion in this same time period, requiring an additional 1.5 billion sq. ft. of warehouse/distribution space to accommodate this growth. The U.S. and Mainland China are the biggest e-commerce markets in the world, accounting for 57 percent of global Internet sales.
"E-commerce has grown steadily over the years, and it will continue at a strong pace for the foreseeable future," said John Morris, Executive Managing Director and Leader of CBRE's Americas Industrial & Logistics and Retail businesses. "As a result, distribution and supply chain networks will continue to be under pressure to meet demand at a time when industrial vacancy is at record low levels. A significant amount of new construction will be needed in the next few years just to keep pace with robust demand."
According to the CBRE report, South Korea is forecast to have the world's highest e-commerce penetration in 2025 at 43 percent. The U.S. will be one of the top 10 markets globally for e-commerce penetration in 2025. To forecast growth, CBRE looked at such drivers as each country's percentage of urban population, debit and credit card use, the population's digital skills and digital technology infrastructure.
"While there is a sizable construction pipeline in the U.S., much of that new space already is leased to meet the demand of the past few years," said James Breeze, Senior Director and Global Head of Industrial & Logistics Research for CBRE. "Moving forward, the challenge in many U.S. and global markets will be to produce enough new facilities to meet this rapidly expanding market. It's important to bear in mind that e-commerce is only a portion of the overall demand for distribution facilities. Traditional retailers, third party logistics companies and others will also be demand catalysts. If developers can't build facilities fast enough, we could see rental rates push well beyond their current record highs."
