Many businesses were worried about how the pandemic would impact their revenue. While the beginning of the COVID -19 pandemic did create a disruption in people’s lives and the market, some businesses have seen an increase since the initial fall. Industrial real estate is one industry that has seen a sharp increase during the pandemic. Here is a look into how the pandemic affected industrial real estate and the possible reasons for the sudden rise in the market.
Background on Industrial Real Estate in 2020
Industrial real estate interactions took a 29 percent decrease from March to April 2020. This was a cause for concern for many in the industry who were worried about the economy in relation to the pandemic. Despite this initial decrease, the overall number of transactions in 2020 was 2.8 percent higher than in 2019. There is some speculation that a 29 percent fall in April catalyzed a period of growth as the following month experienced a 48 percent growth, according to CBRE. These numbers have made many wonder how this was possible amidst the shutdown and fall in the economy.
Rise of E-Commerce in the Pandemic
While the economy dipped in some industries, it rose in others. Due to the risk of exposure, many individuals minimize their interactions with others. The pandemic forced many people to consider how to live their day to day and how it can be adapted to virtual means. People began working, going to school, and shopping online. This led to people no longer being interested in going into the physical stores, and online delivery services became the preferred method to shop for everything, including groceries, clothes, and household items. Online shopping created a demand for warehouse space and resources.
Online groceries require a different need for storing inventory. Perishable products need to be stored and replaced on a short-term basis. This catalyzes industrial real estate transactions and has companies building warehouses.
Virtual shopping has also pushed companies to move closer to customers. Businesses believe that the closer they are to customers, the more revenue will increase. This has caused many companies to move to large cities with high population numbers. Prologis predicts that e-commerce could increase U.S. warehouse demand by 400 million square feet over two to three years.
E-commerce has altered the way we live our lives forever. Even as we move past COVID-19, the option to do things virtually is here to stay. The rise of virtual activities has created new opportunities for growth in the economy. “This increased demand for warehouse space and other industrial real-estate transactions with the help of a real estate lawyer Colchester, VT is another unexpected impact of the pandemic. It will be interesting to see how the economy has shifted as we as a society shift to more virtual life,” says Hisham Khaki, Owner and Founder of HapiGig.