Online shopping is now the preferred method for 68% of consumers, which has increased significantly since the beginning of the pandemic. Since the pandemic began, supply chain issues have impacted the eCommerce sector significantly.
What does this mean for the commercial real estate industry?
Keep reading as we discuss what is causing the changes to supply chains and how these changes will impact demand in the commercial real estate sector. This guide will provide essential information on market conditions affected by supply chain issues.
What Is Causing Supply Chain Changes?
Trends and changes in consumer habits can significantly impact supply chain conditions, and the pandemic caused drastic changes.
Supply chain changes have been occurring since the beginning of the pandemic. With most of the world’s population forced to stay home and minimize shopping trips, eCommerce was the best option for shopping. Online grocery shopping and eCommerce ensured people could access the products and items they needed during the lockdown.
Since the pandemic, eCommerce has continued to thrive – causing a greater need for warehousing and logistics. Supply chains have been strained as competition has recently grown in the eCommerce sector.
Additionally, there have been issues regarding labor shortages, trucking and shipping restrictions, and other structural factors. eCommerce businesses have also faced supply shortages and production delays that push them to seek other options and mitigate risk.
For eCommerce businesses, it is a great time to capitalize on the increased consumer demand, but supply chain changes can inhibit success. However, this rise in eCommerce presents an opportunity for investors to profit from their portfolio of commercial properties in seaport cities like New York.
How Will This Affect The Commercial Real Estate Industry?
Although supply chain issues will be challenging for eCommerce businesses, commercial real estate businesses stand to benefit from these supply chain disruptions.
The changes to the supply chain will benefit commercial real estate in the following ways:
Increased Demand For Warehouse Space
eCommerce businesses will be desperate to increase their inventories and mitigate any risks associated with supply chain disruptions. If they need more stock, they will need more warehousing space. The increased demand for warehouse space means that properties become more valuable, benefitting CRE investors looking to add warehousing spaces in areas like Nashville with large ports into their portfolio.
Increased Demand For Flexspaces
Many eCommerce businesses are investing in flex spaces that serve the function of an office building and a warehousing facility. Investors may take advantage of the rise of remote working to purchase Manhattan office space at a lower cost, repurposing it to provide sought-after flex space for the eCommerce sector.
E-commerce businesses can streamline their daily operations by hosting them in a single area by investing in flex spaces. For CRE investors, the increased demand presents an opportunity.
Since the pandemic forced many businesses to turn to remote work, the demand for office spaces has waned. The need for flex spaces allows CRE investors to transform their commercial office properties into flex spaces, meeting the demand for more warehousing and making their properties more attractive in the current market.
Properties Near Ports Will Increase In Value
Supply chain changes present a valuable opportunity for a CRE investor with many properties near ports and air hubs. Many eCommerce businesses will seek properties close to seaports, inland ports, and air hubs to facilitate logistics. This means CRE investors can maximize their profits on properties in these areas.
Rising Demand For Last Mile Locations
Last mile locations help eCommerce businesses lower the cost of transporting goods once they have been shipped to their warehouse locations. Last-mile sites are situated close to the customer base to reduce ‘last-mile’ fuel and truck labor costs by reducing the travel time to all customer base locations.
The increased demand for eCommerce has caused a rise in the need for last-mile locations, which presents the opportunity for CRE companies and investors to capitalize on this change.
Changing Distribution Center Design And Layout
Due to the increased competitiveness in the eCommerce and supply chain spheres, there has come a need for CRE companies to reconsider distribution center design and layout. By rethinking distribution center design and layout, CRE companies can create warehousing facilities that provide more operational efficiency and increase automation in eCommerce warehousing.
Industrial Real Estate Construction
In addition to logistics, manufacturing is a significant element in the eCommerce boom. eCommerce companies are opening new manufacturing locations to mitigate future risks caused by supply chain disruptions.
There will be an increased interest in industrial real estate properties for the commercial real estate sector. In sought-after areas such as port cities, CRE companies can construct industrial real estate properties to meet the increasing demand for industrial real estate. CRE companies can build smart buildings that facilitate automation and operational efficiency to maximize their ROI and increase profit margins.
Although the competition in the eCommerce sphere is challenging for eCommerce businesses, it presents many benefits for those in the CRE sphere. CRE investors can expect increased demand for properties in port locations, warehousing facilities, flex spaces, and more innovative industrial real estate design. Consider these changes in line with your current CRE investment portfolio to identify an opportunity to profit from the recent supply chain changes.