Demand for Big-Box Warehouses Soars Under E-Commerce Surge, Report Says
October 01 2020 - 6:29AM
Dow Jones News
By Jennifer Smith
A key measure of demand for big warehouses soared 51% in the
first half of 2020 as the pandemic-driven surge in online sales
sent companies scrambling for space to store and deliver goods to
locked-down consumers.
The rush toward distribution centers was most pronounced at the
largest end of the market, real-estate brokerage firm Colliers
International Group Inc. said in a report released Thursday, as
Amazon.com Inc. and other e-commerce and logistics providers
accelerated a push toward sprawling facilities to process, package
and ship digital orders.
The report covers industrial buildings of 200,000 square feet or
more in major North American markets.
"There is a surge in big-box occupancy," said Pete Quinn, the
firm's national director of industrial services. "Amazon obviously
leads the pack. They've got multiple big boxes going up all over
the country."
The online behemoth leased an estimated 26.9 million square feet
in the first half of the year, and is expected to occupy nearly 98
million square feet across the U.S. in 2020 alone, the report
said.
Overall, the Colliers report said the net change in occupied
big-box space -- known as net absorption -- rose by 51% in the
first half of this year in the markets covered from the same period
in 2019, to nearly 79.8 million square feet.
For sites of 750,000 square feet or more, net absorption came to
34.3 million square feet in the first six months of the year, more
than double the amount recorded for all of 2019, Colliers said.
Amazon has been racing to meet surging online demand after a
wave of orders from homebound shoppers slowed deliveries in the
early months of the pandemic. The company said recently it was
opening 100 buildings in September alone, including fulfillment
centers, delivery stations, sorting centers and other sites.
An Amazon spokeswoman declined to comment on the Colliers report
but pointed to comments by Chief Financial Officer Brian Olsavsky
in a July 30 earnings call, when he said Amazon plans to expand its
fulfillment and logistics square footage by about 50% in 2020 from
the previous year. Most of that capacity was expected "to come
online in late Q3 and Q4," he said.
E-commerce sales accounted for a record 16.1% of total U.S.
retail sales in the second quarter on an adjusted basis, according
to the Commerce Department. Online sales rose 31.8% from the first
quarter, and jumped 44.5% year-over-year.
For industrial real estate, the rapid expansion of digital
commerce appears to be offsetting slowdowns and bankruptcies in
sectors such as traditional retail, Mr. Quinn said.
Companies are also looking for more space as they move away from
lean just-in-time inventory practices following shortages early in
the pandemic, when stockpiling shoppers emptied shelves and
manufacturers struggled to ramp up production of in-demand goods
such as toilet paper.
"Right now we're guessing companies are increasing safety stock
by about 5% to 15%," boosting their need for warehouse space, Mr.
Quinn said. "We don't see a lot of companies downsizing their
distribution."
Competition for warehouse space is especially high in logistics
hubs such as Southern California's Inland Empire, Atlanta and the
Dallas-Fort Worth area in Texas with large pools of skilled labor
and access to key transportation routes. For example in
Indianapolis, where several big projects are being built, tenants
are locking in leases before the buildings are finished, Mr. Quinn
said.
Developers are hustling to meet that demand. Some 96.5 million
square feet of new big-box space was added in the first half of
2020, the report found, and an additional 170.7 million square feet
was under construction at the end of the second quarter.
Write to Jennifer Smith at jennifer.smith@wsj.com
(END) Dow Jones Newswires
October 01, 2020 06:14 ET (10:14 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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