In addition to joy and cheer, this year, the holidays are bringing an industry leasing boom, making many property owners quite happy.
While every industry felt the weight of the pandemic last year during the holidays, this year, demand is back, and many retailers are expecting to see a corresponding swell in online shopping the closer we get to the Christmas season.
In response, thousands of e-commerce tenants are locking in more industrial space reducing vacancy rates across the board for the second and third quarter of the year.
While the pandemic may have temporarily stalled the retail world, consumers are back after shifting their shopping habits to fit the world. The first quarter saw a 30% increase in online retail sales during the first half of 2021 and is expected to jump even higher as the holidays inch closer.
A survey conducted by Statista revealed that over half of consumers in the US plan to shop online for the holidays. The expected trend is backed by Salesforce, which predicts that about a third of all global sales for the year will take place this holiday season.
What resulted as a stalled construction year is ending firmly with loads of new development projects in the pipeline as e-commerce companies and retail stores learning to cater to online shoppers are building new industrial space.
Many major companies like Amazon and Wal-mart floundered at first to find a balance on how to provide access to quick inventory in a world that is now dependent on online shopping.
The solution, it appears, is for retail occupiers to increase their industry space footprint so that they have enhanced room for safety stock to prevent items from selling out of stock online due to distribution issues.
This bodes well for those who own and lease industrial space. The expectation is that many retail companies will choose to keep the extra inventory spaces to keep more products on hand and accommodate customers better throughout the coming years.
Currently, the vacancy rate in the US is at 4.7%, which is stunning given that 82 million square feet have been added to the market space, yet the vacancy rate is close to the lowest it has ever been (Only 30 basis points separate it).
The good news for both retailers and industrial developers is that even though 300 million square feet of industrial space are coming, the lingering threat of space shortages or vacancies is starting to slow. It is worth noting that the most important industrial markets in Dallas, Inland Empire, and Atlanta are seeing the most considerable amounts of growth, followed by several key Southwestern markets.
For now, industrial developers can relax as they appear to have plenty of interested retail producers, but the next challenge will be finding labor. Labor shortages affect nearly every industry, and since e-commerce distribution involves labor-intensive roles, it is hard to attract qualified workers.
