By: Beatrice Silva
2 min read August 2020 — Even before the pandemic, billions of consumers had already been shopping on e-commerce sites like Amazon for years. But the pandemic is accelerating the platform’s growth as more and more people pivot away from physical stores. Shoppers say that there is something extremely gratifying about clicking a button and having a product delivered to their door the very next day. That’s music to the ears of those in the industrial real estate segment, as companies see an increasing need for distribution space.
When COVID-19 started to rapidly spread around the world, digital buying was no longer just a trend but a necessity. U.S. online sales grew 76% in June, reaching $73.2 billion that month, according to Digital Commerce 360. As a result, industrial real estate became even more of a hotbed for investment. Warehouses and distribution centers provide companies like Walmart and Target the local space they need to get purchase orders out to their customers quickly and efficiently.
To offer consumers fast shipping, a large majority of the industrial real estate is located near key transportation hubs like seaports, highways, railroads and airports. That’s one of the reasons why a handful of out-of-state investors like Peter Lewis, president and founder of Coastal Realty LLC, have started building their industrial portfolios in the Northeast. Lewis explained to the Philadelphia Business Journal why his firm has increased their industrial properties in South Jersey: “These middle-market companies are going to start transitioning to becoming much more sophisticated online,” he said. “They have to. What that means is they’re going to require more warehousing, which is what our property offers. I continue to see a real demand for warehousing in densely populated areas. It’s going to be all the way from the 4 million-square-foot guys to the 2,500-square-foot guys,” said Lewis. Coastal Realty recently teamed up with Walton Street Capital to buy a 32-building industrial portfolio in Pennsauken.
South Jersey and Philadelphia are lucrative areas because of their unique placement between Washington and New York. “The overall demand for warehouse space has continued to remain strong, especially with the uptick in e-commerce and the expectation by the consumer to have goods in their hands as quickly as possible. When Amazon Prime was introduced, two days for delivery seemed fast and quickly became the norm. We are now finding that next-day delivery, if not same-day delivery, is an integral part of the supply chain that is driving a lot of companies to look for warehouse space in South Jersey. The new speculative and build-to-suit development in our market has been mostly in the northern parts of Burlington County and the southern parts of Gloucester County,” Ian Richman, senior managing director of Southern New Jersey Colliers International, told Invest: South Jersey 2020.
As long as there is a continued increase in consumer spending, the demand for retail space and other commercial activities like distribution centers, in theory, should rise.
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