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USA Industrials / Logistics / eCommerce REITs: Sector Focus
Monday, 29 September 2014 03:40

Logistics & e-Commerce Industrial: It's estimated that e-commerce requires approx 3 times as much distribution space for a given level of sales compared to traditional retail because:

 

1/ They need to contain larger amounts of stock to compensate for the lack of High Street space

 

2/ Traditional warehouses usually store and stack goods on pallets using forklifts, which is very efficient in terms of space per units, unlike with e-commerce where the inventory must be moved in the form of single units, meaning stacks need to be no more than about 6ft high so it can be hand-picked (unless expensive computerised systems are installed - like in Amazon mega-sized sheds).

 

Distribution facilities also now need to carry-out packaging, mail-room, and product return services for individual orders , which both requires more space and staff.

 

Spending on logistics in the US totaled USA$1.1tr in 2009 (Source - Select USA, 2011).

 

About 30% of US industrial big-box demand is correlated to e-commerce, and demand for e-commerce industrial space has doubled over the last 3 years (2012-2014), and will continue to grow because a retailer with USD$1bn in-store sales requires approx 300-350k sqft of logistics space compared with approx 1m sqft for the same equivalent of e-commerce sales.

“Despite what management likes to say, industrial space is generic, and you’re not going to get massive premium during good times like you would for other property types. Boom time in industrial is not like boom time in office and multifamily” (BMO Capital Markets).

There are roughly 185m online shoppers in the US alone (2014) and e-commerce sales are projected to reach USD$304bn in 2014 and account for 30% of all retail sales by 2030. Hence, more and more retailers are offering same-day-delivery promises, driving-up demand for warehouses and distribution centers closer to shoppers.

There is roughly 20bn sqft of industrial space in the US, with much focused around 10 key distribution centres including Chicago, Dallas-Fort Worth, Baltimore & Indianapolis (30% of the nation’s stock).

 

 

 

Last Updated on Tuesday, 28 October 2014 05:01