E-Commerce Continues to Drive Demand for Industrial Space

E-Commerce Continues to Drive Demand for Industrial Space

The Industrial CRE sector remains strong as Amazon and other e-commerce players acquire industrial properties to extend delivery capabilities. Amazon (tkr: AMZN), is investing to make one-day delivery standard for Prime members which in turn is driving the need for more local industrial space near high population density areas. We’re currently working on evolving Prime two-day to Prime one-day” said Amazon CFO Brian Olsavsky on the company’s Q1 earnings call. Olsavsky confirmed that “one-day” will roll out in Q4 on last week’s Q3 earnings call.

In addition to retail giants Amazon and Walmart (tkr: WMT – Walmart has its own next-day delivery service for qualified orders), mom and pop retail businesses are building their own proprietary e-commerce capability and leveraging third party e-commerce platforms such as Drizly which provides a turnkey, vertically-integrated e-commerce platform for adult beverage retailers.

CoStar Group (tkr: CSGP, the leading information services provider to the CRE industry), founder and CEO Andy Florance highlighted the strength of the industrial sector on last week’s earnings call: In the industrial sector, ongoing changes in how consumers shop continue to generate record levels of demand for industrial space despite vacancy rates around 5%. Developers are responding. A record amount of industrial space is under construction, but rent growth continues to post gains about 5% year-over-year… We expect fast growing demand for local distribution space to provide same-day delivery of goods will help offset any slowdown.”

Amazon is converting abandoned malls to Industrial space.