Orange County Partnership - News

Pandemic Will Fuel Explosive Growth in Industrial Sector

Commercial brokerage firm JLL has issued a report that predicts that the COVID-19 pandemic will dramatically increase demand for industrial space, particularly from e-commerce companies that are trying to satisfy a growing consumer appetite for grocery and other retail items.


JLL is now predicting the industry’s industrial space will grow by 1 billion square feet between now and 2025. This bullish outlook for the industrial market, mirrors a CoStar analysis earlier this year that traditional retailers will grab up more warehouse space for logistics and distribution/fulfillment centers, according to a LoopNet report.


The increase demand will focus on new plants, warehouses, distribution and last-mile facilities that will be developed in traditional industrial sectors outside urban and suburban areas as well as some projects that might be housed near or part of neighborhood shopping centers.


Logistics space developer Prologis has estimated that retailers of all sizes will require 1.2 million square feet of distribution space for each $1 billion in sales, which calculates out to e-commerce firms requiring three times the space as traditional distribution.


“Even during a period of unprecedented uncertainty, we’re witnessing power-center retailers such as Walmart aggressively bolster and invest in their distribution networks in order to compete with Amazon, meet the needs of their customers and grow their e-commerce platforms,” said Abby Corbett, managing director and senior economist in CoStar’s Chicago office in the LoopNet report.


JLL notes that prior to the pandemic, approximately 35% of its industrial leasing activity was related to e-commerce. Now, as much as 50% of lease deals have been in connection with online retail, according to a CNBC report.


“The first quarter was our largest leasing quarter in three years,” said Craig Meyer, president of JLL’s Americas industrial division. “We’re seeing more pressure on (e-commerce companies) than the typical holiday season… to meet consumer demand.”


Meyer later termed industrial real estate as the “darling” of today’s commercial real estate sector.


JLL is projecting the U.S. will need another 100 million square feet of cold-storage facilities to keep pace with consumer demand and sales trends.