On this morning’s WJR Business Beat, Jeff shares a sector that’s booming at breakneck speed as a result of the pandemic. The big winner? Warehouse space.
We know e-commerce is hot and the surge in online buying has warehousing riding its coattails. E-commerce companies demand three times more warehouse space than physical retailers do, so demand for warehouse space is skyrocketing, making this real estate sector among some of the hottest in the U.S.
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“So, if you’re looking for a hot real estate play, your tip of the day: look into warehousing.”
– Jeff Sloan
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Good morning, Paul.
In the midst of all of the challenges businesses are facing today, believe it or not, bright spots are emerging as the shifting sands of the business world continue to morph at breakneck speed as a result of this pandemic.
We know e-commerce is hot and the surge in online buying has a particular real estate sector riding its coattails and booming.
The big winner?
Warehouses. That’s right, because e-commerce companies demand three times more warehouse space than physical retailers do, demand for warehouse space is skyrocketing, making this real estate sector among some of the hottest in the U.S.
Nothing fancy here, Paul, we’re talking about large, no-frills, industrial buildings used for commercial inventory storage, for which rents have risen to an all-time high and vacancies to an all-time low, according to the real estate service company, CBRE.
Data from Pro Lodges, the largest owner of industrial space in the U.S. confirms it: e-commerce companies need three times more warehousing space than brick-and-mortar retailers. Victor Calanog, a chief economist at Moody’s Analytics, explains that this need is because online retailers tend to stock a broader array of products than do brick-and-mortar companies, and generally more of each item, as well.
And he explains that in order for an online retailer to generate comparable revenues, relative to brick-and-mortar retailers, they need to sell more goods and therefore they need more space in order to warehouse these goods.
To illustrate, in order to generate a billion of revenue, a brick-and-mortar retailer needs about 350,000 to 400,000 square feet of warehouse space, while an e-commerce retailer needs about 1.2 million square feet, explains Calanog.
So, if you’re looking for a hot real estate play, your tip of the day: look into warehousing.
I’m Jeff Sloan, founder and CEO of StartupNation.com, and that’s today’s Business Beat, brought to you today by Dell Technologies, on the Great Voice of the Great Lakes, WJR.
