The Rise And Rise Of E-Commerce
E-commerce has traditionally accounted for just 1-2 per cent of retail sales – but that’s set to change, growing to up to 3 per cent or even 5 per cent, thanks to COVID-19’s impact, according to Ridwaan Loonat, property analyst at Nedbank CIB. In fact, Loonat says that Prologis puts this number closer to 20 per cent.
The ramifications are significant: with e-commerce taking up three times the space that a bricks-and-mortar store would need per dollar of sales, it’s clear that demand for distribution centres and urban warehouses is set to grow.
The change is already taking place, says Steven Brown, CEO of Fortress REIT, reporting that the company’s vacancies in the logistics space is in the low digits, while Bruce Fields, national director of JLL, says that one national retailer has reported a 200 per cent online boom, thanks to COVID-19. “The increase in e-commerce adoption, particularly for food, fast-moving consumer goods, pharma and health-related products should support demand for modern logistic real estate.”
In addition, overflow space has also been required as a result of the need to create contingency in the supply of goods due to the impact of COVID-19. Surges in demand for certain goods, as recently experienced due to the pandemic, may require a rethink of certain supply-chain management aspects as suppliers may seek to bolster supply of certain high-demand goods.”
Fields adds that despite the wide range of industries making use of logistics real estate, the disruption to brick-and-mortar retail – and on logistics supply space in particular – is likely to be limited, because consumer spend is expected to remain subdued in the short- to medium-term.
That said, there is likely to be greater demand for logistics centres suited to meeting the needs of the e-commerce market in terms of location and design, especially given the growing demands on delivery timelines as the national footprint for key e-commerce service providers continues to develop.