While the COVID-19 pandemic affected the commercial real estate market dramatically, the industrial market continued its momentum, according to a new report from Colliers International.
The report, “COVID-19’s Impact on New Jersey’s Industrial Market,” found that industrial demand was boosted by e-commerce transactions — as consumers shifted away from brick-and-mortar sales to online shopping due to the pandemic.
“Industrial demand has been boosted by substantial e-commerce transactions, creating even more of a shortage for big-box warehouses,” the report said. “Stay-at-home orders have accelerated the shift toward e-commerce purchases, a trend that will likely stick and be a permanent part of consumer buying habits. This will eventually increase demand for distribution space, particularly cold storage if online grocery shopping persists.
“Additionally, with retailers struggling to remain afloat during the current environment, repositioning of larger retail sites may provide some relief, but comes with its own set of obstacles to overcome.”
The report noted that U.S. e-commerce sales were up 44.4% year-over-year, the second-highest increase on record.
Amazon “has been gobbling up what little warehouse space remains available,” Colliers said, leasing nearly 8 million square feet between the fourth quarter of 2019 and third quarter of 2020, representing 19.2% of the total square footage leased during that period.
Other trends the report found included demand for cold storage space far exceeding supply, as well as conversions of vacant retail sites to last-mile distribution centers — another area where Amazon is a big factor.
“The pandemic has done little to slow industrial leasing activity or the need for new supply,” the report concluded. “Demand for cold storage space and e-commerce distribution centers will continue to fuel positive momentum in the near future.”