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Rapid growth of e-commerce reshaping U.S. industrial market

Robust demand from e-commerce companies and traditional retailers for the limited supply of new, “big-box” facilities is reshaping the U.S. industrial market, resulting in strong leasing for Class A space, build-to-suit development and the return of speculative construction, according to the latest report from CBRE  titled ‘E-Commerce and the Changing U.S. Industrial Landscape.’

“Demand from e-commerce companies has played a leading role in the recovery of the U.S. industrial real estate market over the past two years,” said Scott Marshall, Executive Managing Director for Industrial Services, Americas, CBRE. “During the first quarter of 2014, virtually all U.S.

Markets were buoyed by strong demand for distribution space from the e-commerce sector. Supply chain demand was centered in major inland and coastal port markets, resulting in strong absorption and shrinking availability in markets such as Atlanta, Chicago, Miami and Houston.”

As big-box facilities are in short supply, there is a supply and demand imbalance in the Class A market. Developers have responded by aggressively inking build-to-suit deals and breaking ground on approximately 45.7 million sq. ft. of speculative development. But, with 30 million sq. ft. of active e-commerce requirements, and demand likely to remain strong over the next few years, supply will not catch up to the demand anytime soon.

“By 2017, online sales could account for more than one-tenth of all U.S. retail sales, up from 6.2% in 2013,” said Adam Mullen, Head of Supply of Chain Services, CBRE. “To keep up with growing demand, e-commerce companies and, increasingly, traditional retailers are making major investments in big-box facilities that function both as warehouses to store goods and distribution centers to fulfill online orders.”
The Inland Empire is among the core distribution markets in the U.S. and has more than 16 million sq. ft. of industrial facilities is under construction.