The Impact of E-Commerce and Omnichannel Commerce on Industrial Real Estate

Katy Pilling

Aug 4, 2020

What is Omnichannel Commerce?

As more consumers begin to shop online for a range of needs, e-commerce has shifted the real estate market as companies look for bigger warehouses to ease product distribution. This increase in e-consumerism also has escalated another type of customer: the omnichannel buyer. This type of omnichannel buyer consumer uses both in-person interaction and digital tools to shop for the products they need: buy an item online and return it to a physical store, or research an item online then buy it in a physical store. The key to this type of commerce is the intersectionality between a brick-and-mortar presence and a store’s online platform. This expanding set of consumer behaviors across this rapidly-changing landscape will have significant and interesting impacts on the industrial property market.

With the worldwide Covid-19 lockdowns, omnichannel commerce likely will witness an even bigger expansion as stores reopen and shoppers exchange or return items that they purchased online while staying home. Many larger retailers, such as Macy’s, have already set plans in place to convert operations into more of an omnichannel business by reducing physical stores and increasing all online presence. The face and operational models of brick-and-mortar stores are altering rapidly, as consumers shop online for items other than food or perishable necessities that weren’t available at grocery stores, take advantage of extended return policies, and participate in the increasing expansion of curbside pick-up and delivery methods with restaurants and other foodservice providers.

Impacts on Industrial Property

While there may be some negative impacts on brick-and-mortar stores as companies adapt to changing consumer needs and reduce their physical presence in communities in the post-COVID economy, CBRE estimates that by 2022 industrial building rent will witness an annual net growth of 5.7%. While online shopping has increased exponentially since the pandemic began, there are mixed views on how it will affect storefronts as states begin to reopen their operations. With the trend in online shopping expanding, there will be an increase in industrial building demand, even as the physical stores in shopping malls and other commercial complexes - such as Macy’s closing 120 stores - could decrease.

Nationally, there are already pockets of this industrial growth in response to the e-commerce boom. In Maryland, Amazon plans to open seven new last-mile distribution warehouses. In Houston, e-commerce retailers are seeing increased interest in industrial manufacturing and distribution buildings. Other types of property real estate - such as storefronts or other commercial properties - may be in decline, but the industrial property market - especially distribution centers - is on the rise.

Final Thoughts

As the country embraces the reality of a post-pandemic world with unforeseen economic challenges and the looming possibility of additional outbreaks that will cause further issues, industrial properties remain in a precarious and uncertain position. No matter the estimates and predictions, the world is changing and changing rapidly. Whether brick-and-mortar stores rebound as the country reopens, or they witness a significant decrease in in-person retail interaction as customers increasingly shop online, consumers and the Internet will dictate to a large degree the trajectory of where industrial properties head in the new landscape.

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