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How Will E-Commerce Change Commercial Real Estate?

By Edwin Moss

How will e-commerce change commercial real estate?

With e-commerce giants like Google and Amazon expanding services globally, it is inevitable that the commercial real estate industry will evolve to support these operations.

According to a study from CMO.com, online retail sales were $231 billion in 2012 and are expected to reach $310 billion in 2017. While many businesses are opting for a multi-channel sales approach, the majority of buyers are looking to e-commerce. What does this mean for commercial real estate?

Retail Impact

The prevalence of brick and mortar stores will begin to shift in order to accommodate the growing impact of the e-commerce industry. Retail stores have continued a trend of downsizing their store counts and sizes to adjust for fewer physical customers, especially in secondary and tertiary markets. Location will be a key factor in occupying commercial retail spaces.

This is not all bad news, however. If retail stores can maintain their sales volumes in smaller stores, landlords should be able to charge higher rents per square foot of space, while also fitting more stores into their centers.

Industrial Impact

Commercial development and industrial real estate should increase, based on e-commerce organizations’ need for warehouse and distribution space. Many companies in the e-commerce business are searching for space that can meet heavy power requirements and have high clear heights, in addition to being centrally located. With same-day delivery models increasing in popularity, companies will continue to invest in industrial properties located near their clientele or major transportation outlets.

Overall, we expect that the commercial real estate industry will continue to transform, but all signs point to the industrial market leading the way, with e-commerce acting as its main driver.