October 23rd, 2019

In 2010, e-commerce retail sales in the United States made up only 4.2% of all retail sales. However, by the last quarter of 2017, e-commerce sales made up 9.1% of all retail sales. In other words, at the end of 2017, these e-commerce sales totaled over $115 billion. E-commerce’s success does not appear to be a temporary phenomenon. It is projected that e-commerce’s retail growth will continue to expand going forward.
 
Amazon has been a major player in the success of e-commerce. In 2010, Amazon’s revenue was found to be in an excess of $34 billion, and by 2017 the e-commerce giant’s revenue grew to $178 billion. Currently, Amazon owns 43% of all e-commerce purchases undoubitably dominating the space. Amazon alone accounts for nearly half of all e-commerce sales. However, other e-commerce retailers are also contributing to online sales. The success of e-commerce is directly tied to the growth of the industrial market.
 
According to CBRE, E-commerce accounts for almost 9% of total retail sales in the U.S. today and has been growing nearly three times faster than brick-and-mortar sales since 2010. The impact of this growth on the supply chain is profound. A hallmark of e-commerce is superior service—a nearly infinite number of choices, fast delivery and flexible return options. This pressure on the supply chain has driven demand for industrial real estate to nearly unprecedented levels and has fundamentally changed the look of the modern warehouse.
 

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How much demand is coming from e-commerce users?

Figure 1: 1.25 Million Sq. Ft. of Industrial Demand from each $1.0 Billion in E-commerce Sales
Source: Forrester Research, CBRE Research, 2018.

It is commonly thought that an e-commerce supply chain requires up to three times more warehouse and logistics space than a traditional brick-and-mortar supply chain. Anecdotal evidence suggests that this is true, but a recent CBRE Research study found that for each incremental $1 billion growth in e-commerce sales, an additional 1.25 million sq. ft. of distribution space is needed to support this growth. Per CBRE, this suggests that of the 236 million sq. ft. that was absorbed in 2017, approximately 30% of it was attributable to e-commerce.

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How is e-commerce affecting building design? 
Figure 2: U.S. Average New Warehouse Building Size
Source: CBRE Research, CBRE Econometric Advisors, 2017.

CBRE research showed that demand for efficient logistics space that facilitates quick movement of goods to consumers has necessitated design of new warehouses that are larger in size and height. The average new warehouse in the U.S. increased by 108,665 sq. ft. (143%) in size and 3.7 feet in height when comparing high development activity periods in 2012-2017 and 2002-2007. Distribution markets that serve major population centers and have land for new warehouses saw building sizes increase the most, including Atlanta, the Inland Empire and Cincinnati. Rapidly growing e-commerce sales are the primary driver of this trend, and markets lacking sufficient modern logistics facilities have further expansion potential ahead to keep pace with this rising demand.

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