Three Ways the E-Commerce Boom Has Affected Commercial Real Estate
Not only has technology driven e-commerce, but the pandemic has made us adapt more e-commerce habits. In 2020, we reached the expected rate of e-commerce growth two years early. Its convenience has shifted the way we shop since the 1990s and it only continues to grow. There was an over 30 percent increase in e-commerce sales from 2019 to 2020; estimated at $791.4 billion, according to the U.S. Department of Commerce. This not only affects how we live our day-to-day lives, but it has an impact on many other industries, including commercial real estate.
Growth in Distribution Spaces
An essential part of the e-commerce business is its supply chain. Figuring out the logistics for packaging and shipping goods to customers includes warehousing, and that’s where commercial real estate comes into play. As e-commerce has grown, we have seen significant growth in the leasing and sale of distribution centers and warehouse spaces.
E-commerce giants look for spaces near large cities like Houston while still having enough space for large buildings. There is a lot of potential and growth in the Houston suburbs such as Katy, Brookshire & Waller. We are seeing more distribution centers popping up in these areas.
Smaller Retail Spaces
As retail has shifted to online, we have seen businesses struggling to keep physical spaces open over the past few years. While e-commerce is booming, some brick-and-mortar spaces are having to close or downsize.
There are certain markets, like groceries, that will always require a physical location, but there is a trend for smaller retail spaces across the market. Smaller spaces mean less inventory in-store, and this consequently encourages a combination of online and in-store shopping. Hybrid shopping especially increased in popularity during the Covid-19 lockdown.
Merging online shopping with curbside or in-store pick-up offered that element of convenience and a safe way to shop during the pandemic, and even as restrictions ease, people will still seek the ease of this approach. However, even though convenience is what mainly drives e-commerce, we don’t expect to see in-store experiences disappear altogether.
Increased Technology in Retail
Since many prefer shopping online, working to translate the benefits of technology to physical spaces has been important in keeping up with trends. Integrating technology into retail spaces will be essential for future leasing and selling opportunities in the market. Implementing tools such as apps can create unique and convenient shopping experiences and can help businesses gather data that is essential for tracking traffic and learning more about the customer.
These tools can also help drive customers to the retail location with special offers or in-store pickup options. Large lifestyle shopping centers have shown to be among the most proactive in blending technology with consumer experiences.
Overall, e-commerce has a major impact on the commercial real estate business, from the industrial real estate benefit from its growth to seeing space buying and leasing becoming a smaller part of retail operations. In 2020 alone, e-commerce accounted for 14 percent of all sales, but it is inevitable that e-commerce will continue to grow as it has for the last decade. Commercial real estate is a reflection of society and its habits and we will continue to see it mirrored as changes in technology and retail emerge.
By: Chris Lewis
Lee & Associates – Houston is a fully-integrated, commercial real estate company. Our business-minded brokers specialize in office, industrial and land real estate investments. As the fastest-growing, broker-owned firm in the nation, we are uniquely qualified to support our clients’ needs in the local, national and international markets. To learn more visit www.lee-associates.com/houston.
Chris Lewis is a co-managing principal at Lee & Associates – Houston. He specializes in landlord and tenant representation in the office sector of the Houston commercial real estate market. Lewis has more than 18 years of real estate expertise with extensive knowledge in tenant relocation, tenant expansion, lease negotiations, market analysis, and property marketing.