Ecommerce, Retail, and The Pandemic
Six months ago, a normal Saturday might entail a trip to the mall for some new blue jeans, a stop by the grocery store to pick up food for the coming week, then possibly dinner with friends at your favorite local restaurant. Not any more.
Now, it’s shop online for those jeans, order groceries for a parking lot pickup, and grab take-out to bring home and eat with just the family.
Ecommerce, Retail and The Pandemic
This translates to huge changes in the supply chain and how we move products and services across the country. Many experts believe that we have been headed in this direction for a while. The pandemic accelerated the process from ten years to less than two.
First, we had tariffs placed on imports from China. Next, their early troubles with COVID-19. This caused many manufacturers to shift production to other Asian countries as well as into South America. Once produced, manufacturers needed to get those goods to retailers.
It became cheaper to come up through the Suez Canal and come up the east coast. This created a need for distribution warehouses at ports of call in the gulf coast and along the eastern seaboard. Prior to the pandemic, the majority of cargo-container traffic came through the Port of Los Angeles. This shift in delivery routes may represent a boon to ports in the Gulf and along the east coast.
Houston and Tampa Bay are examples of cities who could potentially benefit from the new trade routes. How much activity they see remains to be seen.
Real Estate Needs
In an article posted recently by JLL, Craig Meyer, President, Industrial, JLL, Americas. stated that “We have historically attributed as much as 35% of industrial leasing to e-commerce, and, currently, as much as 50% of our leasing activity can be attributed to e-commerce related operations,”
Consumers now have expectations of receiving the products they ordered within two days or less. Rich Thompson, JLL’s head of global supply chain and logistics team recently spoke with Bizjournals. He stated he has been busy assisting his big-box clients to meet the rising demand for fast shipping to customer’s doors. In the past, retailers would be content with one large distribution warehouse. The need for speedy delivery to consumers is posing a requirement for more strategically placed warehouses. They are even moving into smaller markets, not typically considered for warehousing.
This could also impact regional airports as competition with Amazon’s delivery speed affects other retailers attempting to make inroads in this space. Real estate experts are predicting that this will include a new rush of air-cargo traffic and development to support this. South Carolina’s Greenville-Spartan completed a $33 million air-cargo hub. Fort Worth’s Alliance airport has a new 26,000-acre mixed-use development. These are just a couple of examples of the evolution of the supply chain.
Location, Location, Location
Investors are now pushing money into supersized regional warehouses with extra storage capabilities.
Ben Conwell, a senior managing director at Cushman & Wakefield told Bizjournal recently:
“The push now includes properties in midtier markets and a progression toward smaller population areas. It’s also prompting a wave of innovation in a subset of commercial real estate long overshadowed by its more dynamic hospitality, retail, and office cousins.”
Retail owners are increasingly looking at micro-fulfillment centers and logistics nodes that can sit right behind stores. This all amounts to a need to have distribution close to where consumers live.
For years, mall landlords have been looking for ways to curb their losses in the age of online shopping.
Now they’re betting that ecommerce — the very thing that disrupted their businesses to begin with — will help provide that boost.
“Our clients have been increasingly considering micro-fulfillment as a two-birds- with-one-stone approach: landlords need to fill vacant retail space and retailers need to get goods ordered online shipped to customers,” says Naveen Jaggi, President, Retail Advisory Services, JLL, Americas
Simon Property Group is currently transforming several of their properties. In this recent article, we discussed this in much more detail.
We have to face it; the pandemic has changed both retail and e-commerce. The way we shop will forever be different. We want to shop in our pajamas and we want what we ordered delivered quickly. This means retailers need to have last-mile distribution close to where their customers live. And that means buildings will be repurposed and new warehouses will be built at an increased rate.