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Led by strong demand and pricing, industrial real estate is expected to flourish in the year ahead. These four factors are fueling factory and warehouse gains.
- Cold storage needs are rising. Food and beverage e-commerce is driving the demand for cold storage facilities. An additional 75 million to 100 million square feet of freezer and cooler space is expected to be needed over the next four years to meet the demand for direct-to-consumer food delivery.
- Technology developments are shaping industrial spaces. Robotic piece-picking machines, autonomous vehicles, and more efficient sorting and picking have led to the construction of larger and taller distribution facilities—the total number of buildings with ceiling heights of at least 40 feet have increased from fewer than 200 in 2017 to a projected 275 in 2020, and new industrial developments of at least 500,000 square feet jumped from 180 in 2017 to 210 in 2019.
- Distribution speed is blurring the lines between storage and retail. Mega retailers like Amazon and Walmart now offer one-day shipping. In addition, Walmart and Target use their retail stores as distribution points, creating a combination of warehouse and storefront.
- Artificial Intelligence and machine learning are driving efficiencies. Automation technologies such as transaction processing, order trading and delivery, and supply-chain planning can reduce manual work, costs, and errors. In addition, businesses are projected to create more domestic supply chains as a result of the pandemic. If business inventory increases by 5%, an estimated 400 million to 500 million square feet of additional warehouse space could be necessary to accommodate the new level of goods stored in the U.S.
Sources: NKF Research, CBRE, IndustryWeek, Forbes, MH&L