International E-Commerce Transforming Industrial Real Estate

Consumers these days are promised anything and expect everything when it comes to the seamless delivery of a product to their home. The supply chain from retailer to consumer follows an international web of retailers and logistics companies, with the goal of speeding up delivery of goods to the consumer.  The demand for urban warehouses and international distribution centers has transformed the industrial real estate market.

E-commerce has led to a borderless, international marketplace with growing demand for Western-made products in the East.  China has been a leader in e-commerce up until recently, forcing other countries to adapt to remain competitive.  Industrial spaces have grown to meet the demand of the international trade market. Ming Z. Mei, CEO of GLP, a leading international logistics provider, has studied how retail patterns have changed in order to keep its facilities competitive.  “Retailers employ multiple strategies to target different channels of their product,” Mei said in a recent article for the NAIOP Commercial Real Estate Development Association. “They would need to have bulk distribution facilities for a national, traditional retail network. Then for their online retail, they need to be closer to their population base for last-mile fulfillment.”

Delivery times in the United States and abroad have become more efficient to meet the demand of consumers who want goods delivered within hours of purchase. This has created a shortage of warehouse space, forcing retailers to buy multiple properties near urban areas.

The Charleston industrial real estate market is experiencing this trend, and seeing a higher demand and lower vacancy rates for larger warehouse and distribution facilities between 200,000 and 700,000 square feet. The expansion of the international e-commerce market, demand for faster customer fulfillment and expansion of major manufacturers in the region has prompted this investment activity by developers locally. The latest Colliers International “Research & Forecast Report Q4 2016,” shows that the market vacancy rate is 4.2 percent, down from 8.5 percent at the beginning of 2016.  The vacancy rate in the Charleston market continues to decrease, and the scarcity of land is driving the purchase price up. Charleston is a prime location since it has access to more than 69.7 percent of the nation’s population within a 16 hour truck drive. Charleston’s access to the Port of Charleston, an inland port, and major interstates has positioned the region to become a major e-commerce hub to fulfill customer orders and provide last-mile delivery in a short time frame.

Source: “How International E-Commerce Has Changed Industrial Real Estate,” by Travis Gonzalez, NAIOP, February 7, 2017

Source: “High Demand and Low Vacancy Drives Institutional Activity,” Colliers International Research & Forecast Report, Charleston Q4 2016

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