Almost every consumer has experienced changes in the way we buy and sell products. But many people don’t consider how technological developments related to commerce fundamentally affect supply chains. While many businesses have shifted away from brick and mortar retail, there has been an increasing demand for industrial real estate as companies work to keep up with expanding distribution, shipment and warehousing needs.
Online shopping and industrial real estate
Fifty years ago, if a consumer wanted a product, they would typically go to a brick and mortar store to purchase it. If the product wasn’t available locally, they might order it from a catalog or request a special order in-person from a retailer. Most commerce on an individual level was conducted face-to-face.
These days, a consumer can browse millions of items online, select the specific product they want and have it shipped to their doorstep from a manufacturer across the world—in a matter of days.
To keep the e-commerce system working efficiently and reliably for consumers, supply chains have shifted. Because of the increased need for warehousing, distribution centers and shipment facilities, industrial real estate demand has remained strong, even in the midst of uncertainty in other sectors of the real estate market.
One of the major drivers of rising demand for industrial real estate is the effort on the part of e-commerce sites to deliver shipments to consumers in as little time as possible. Consumers have grown to expect rapid deliveries—sometimes the same day as they place an order. E-commerce companies have to be able to deliver. To make this happen, they need more warehousing space and distribution centers near their customers.
In addition to the changes occurring within commerce itself, there are also major changes happening with order distribution and fulfillment.
A lot of companies, especially major online retailers, are utilizing automation and robotic technology in their warehouses and distribution centers to boost efficiency and cut costs. But, this technology can’t just be placed in any warehouse or distribution space. Companies need industrial properties specially configured to accommodate this new technology.
Warehouses and distribution centers designed around robotics and automation technology are unlikely to really boom for at least the next several years. But, investors can anticipate major growth in this area in the future.
At the same time consumers are demanding online products with minimal delivery times, more people are moving into urban areas where there’s a high concentration of consumer demand. Instead of using larger warehouses and distribution centers in a single area, many companies are investing in smaller warehouses and distribution centers in urban areas. In many places, the demand for urban warehousing is growing at a rate that’s far more rapid than supply. In those areas, investors who manage to get their hands-on warehousing space can enjoy the benefits of the growing urban warehousing market!
How investors can get ahead of trends
When it comes to real estate investment, it often seems like the only thing that’s certain is that nothing is certain! Projections and estimates can help you determine what the future might hold for real estate investing, but the market always has the potential to move in a direction you weren’t expecting.
The most important thing for you to do as an investor to ensure your portfolio stays viable in the long run is to be flexible. Make choices based on your understanding of the market and professional guidance and make corrections if something changes or new factors come into play.
If you have the capacity to invest in an industrial facility or site on your own, it may be an option that yields great results for your investment portfolio. On the other hand, if you are unable to invest in an industrial property or you aren’t ready to take on this commitment yet, you can invest in professionally-managed industrial REITs.
Regardless of the option you choose, it’s helpful to start by doing research on the industrial real estate market. Understanding industrial real estate on a deeper level will help you determine whether you are ready to invest in these types of properties or not. If you are, you might be on the cusp of a trend about to take off!