During the 19th Century, the Industrial Revolution sparked a series of innovations that made it possible for manufacturers to create more goods than consumers could purchase for the first time in human history. Now, two hundred years later, the Digital Revolution is having a similarly transformative effect on the global consumer market. With more people shopping online at sites like Amazon and Ebay every day, the supply chain infrastructure that made e-commerce possible is now struggling to keep up with the demand.
These days, it’s not just big tech companies that are driving the push toward online shopping; veteran retailers like Wal-Mart are working to remain competitive in the e-commerce market as well. With Amazon hoping to one day deliver everything from textbooks to groceries straight to consumers using drones, some market analysts have been left to wonder if we’ll still be shopping for anything at brick-and-mortar storefronts in 50 years. If this dream of a global market run on e-commerce is to become a reality however, we’re going to need a whole lot more space to hold goods before they’re delivered to consumers.
According to real-estate brokerage firm CBRE Inc., in 2015 rental rates for prime warehouse space in the U.S. spiked by nearly 10 percent compared to the previous year. CBRE defines “prime warehouse space” as any facility greater than 100,000 square feet that was built for modern fulfillment needs. In the fastest-growing warehousing markets of Southern California, rates on these properties rose by as much as 29 percent. The company expects rental rates to continue to rise by roughly 6 percent this year. In July of this year, CBRE found that the availability of warehouse space in the U.S. was at its lowest point since 2001.
Unsurprisingly, analysts have attributed the rising demand for warehousing almost exclusively to rapid growth in the e-commerce sector.
The effect e-commerce sites are having on the warehousing industry is twofold. To begin with, e-commerce has contributed to an increase in the total volume of goods that is being shipped around the world on any given day. In addition to this increase in sheer volume, however, the e-commerce ethos has also forced companies to focus on increasing the speed of delivery as well.
“There are huge premiums being placed right now on being close to the consumer – speed of service, speed of delivery is a critical component of why people choose to buy from one retailer over another,” said David Egan, CBRE’s head of industrial and logistics research for the Americas, in an interview with The Wall Street Journal. “To get the goods to consumers fast, you have to get close to them.”
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