• Home
  • News
  • Retail
  • Online shopping fuels demand for warehousing

Online shopping fuels demand for warehousing

By Don-Alvin Adegeest

loading...

Scroll down to read more

Retail

Shopping from the comfort of home or our mobile phones is a convenience we can no longer live without. But where do all the clothes come from that don’t originate from boutiques or the shop floor? They are stored in warehouse hubs, often in locations we may not come to expect.

According to the CBRE 2018 Global Industrial & Logistics Prime Rents report, the surge in e-commerce and online shopping has doubled the demand for warehouse space in the last decade. Rents have significantly increased across major European hubs, with Budapest and London achieving the highest rise in prime rents at 11.1 percent and 10.0 percent, respectively.

E-commerce continues to drive demand, but the market is increasingly facing supply constraints, which in turn is driving rent appreciation, states the report. Furthermore, some markets are experiencing soaring construction costs, labor shortages and wage inflation, in addition to competition from other land uses.

In terms of capacity, approximately 235 million sq ft of warehouse space was leased or purchased between 2007 and March 2018, the equivalent to more than 3,000 Wembley Stadiums. That figure is up from about 130 million sq ft in the previous decade, notes the BBC.

60 percent of warehouse space is used by retailers

About 60 percent of warehouse space is used by retailers, which a decade ago was just one third. "Demand has been unprecedented," said Andrew Marston, who researches UK industrial and logistics property at CBRE, which compiled the figures for the BBC. "Growth has come from online retailers, a number of which have been rapidly expanding their distribution networks."

Consumer requirements for speedy service have forced everyone in the retail supply chain—manufacturers, suppliers, distributors and retailers—to carry more inventory in more locations. Last-mile delivery has been a key focus, generating greater requirements for urban logistics space, such as multi-story warehouses in densely populated areas, states the report.

Yet despite massive user demand in the major logistics hubs worldwide, developers have exercised discipline. This is partly due to the difficulty in obtaining suitable sites to accommodate either large hubs or focused local distribution nodes. This is particularly evident in the U.S., where completions have trailed demand for 28 of the past 30 quarters since Q3 2010.

Supply constraints are forcing up rental prices and prime rents increased by 3.2 percent globally year-over-year in Q1, up from 2.2 percent a year earlier. Sixty-nine percent of the markets surveyed by CBRE Research registered positive growth in this period, up from 60 percent in 2017.

But not all markets have seen soaring inflation. The report notes the industrial & logistics location hubs to watch, which include Bangalore in the Asia Pacific market and Dublin in Europe. Retailers looking for warehousing may wish to take note.

Photo credit: Warehouse by Keller & Kalmbach GmbH, source Wikimedia Commons; article credit: CBRE report Global Industrial & Logistics Prime Rents 2018

E-commerce
Online Shopping