New Industrial Demand Won’t Be Met for Years

The pandemic has spurred tremendous ecommerce activity. In fact, some CRE players are calling the market boost the silver lining of the pandemic, and a clear benefit to ecommerce players. A recent report from CBRE noted that the pandemic push has catalyzed as much as 500 million square feet of new industrial demand in the US—but it will take years for to provide that new supply to the market.

“It will take years.  Infill markets are already built out with a very high level of occupancy,” Kurt Strasmann, executive managing director of CBRE’s Orange County and Inland Empire operations as well as CBRE’s pacific southwestern functional industrial and logistics market leader, tells GlobeSt.com. “This means developing new product will be necessary, which is not easy to do in infill markets, such as Los Angeles and Orange County. It is therefore my and our firm’s belief that areas such as the Inland Empire will continue to thrive with new development for years to come due to the availability of buildable land.”

Highly populated and dense markets, like Southern California, will be prime targets for the new demand—but these regions are already suffering from industrial supply shortages and limited land for new development. As a result, Strasmann says that there could be a supply shortage in the short-term for industrial product while the market, yet again, adjusts to heightened needs for industrial space. “Right now, we are seeing a short-term interim pause on business decision making in general due to the COVID crisis but this will pass as we gravitate to the new normal, which is changing in real time,” he says.

This isn’t going to be a short-term trend, either. The ecommerce market pick-up a new customer demographic during the pandemic. “This crisis has forced all sectors of society to adapt and purchase consumable goods online—all within a mere 60 days,” says Strasmann. “Think about the increase in online purchases across the board.  The speed of this growth has been truly amazing and will directly benefit the industrial sector.”

This new demographic will be integral in changing ecommerce and fueling demand well beyond the end of the pandemic. “The post-COVID time period plays very strongly to the industrial sector for many reason, but one of the primary ones is the fact that online purchasing has been adopted across generations now,” says Strasmann.