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Warehouse Demand Sees Huge Spike

By: Kelly Leighton on in

Despite the fact that vaccination rates in the U.S. are nearly at 70% and many people feel comfortable returning to normal life, the demand for e-commerce, which soared during the COVID-19 pandemic, remains high.

The commercial real estate industry, specifically warehouse and storage, is reaping the rewards of those demands. Warehouse demand is up 22% in 2021, according to the 9th annual U.S. Industrial Demand Study.

The study found that logistics and parcel delivery represents close to 20% of all demand, the top category. This includes companies like UPS and FedEx. The second highest demand comes from e-commerce, representing companies like Amazon and Overstock. The third highest demand comes from traditional retailers, like Target and Lowe’s, who are also showing a need for e-commerce storage space. Food and beverage along with construction, machinery and materials rounds out the top five. With new housing in demand as well, the demand for construction, machinery and materials companies saw a huge gain, growing close to 15 million square feet. Overall, these five categories represent more than 54% of all tenant requirements in the country.

E-commerce saw a huge spike in 2021 with the COVID-19 pandemic, new entrants into the field jumped 21%. The report estimates that 2021 will have more than half of all e-commerce demand in urban areas. However, the demand for warehouse space is driving up rents for these spaces. The report found that rents are up close to 10% in the first five months of 2021.

Ultimately, the report predicts the demand for industrial spaces will continue to grow as the country rebounds from the pandemic and adapts to a new “normal.”

Remote Work, Technology Top List of Commercial Real Estate Concerns

“Remote working and mobility is something that is quite concerning to the real estate industry as to what behaviors, and to what extent, remote working will stick, and time will tell,” said Michel Couillard, the Counselors of Real Estate’s CRE 2021 global chair, told The Commercial Observer. “COVID really impacted human behavior in terms of where and how space will be used, and there will probably be a need for commercial properties to reposition in order to meet that changing demand.”

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“The industrial sector was the undisputed commercial real estate champ in 2020 and expect it to remain strong in 2021 together with medical office and data centers,” said Joel Kreider, president of the Philadelphia Chapter of Society of Industrial and Office Realtors®. “Investors will be chasing opportunities throughout those three sectors this year and look for a trend toward smaller warehouse deals with expanded parking ratios as e-commerce fuels the need for last mile logistics.”

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