With e-commerce penetration expected to grow to 26% of all retail sales by 2025, the United States will need an additional 330 million square feet of distribution space just to handle the increase in online ordering in that timeframe, according to a new report from CBRE.
“E-commerce has grown steadily over the years, and it will continue at a strong pace for the foreseeable future,” says 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.”
- The anticipated e-commerce-generated-demand represents 27% of the projected overall demand for industrial real estate in the United States 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.
- Every additional $1 billion of e-commerce sales requires 1 million square feet of new distribution space.
- South Korea is forecast to have the world’s highest e-commerce penetration in 2025 at 43%. The United States will be one of the Top 10 markets globally for e-commerce penetration in 2025.
“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,” says 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.”