JLL Forecasts Industrial Demand to Hit 1B SF by 2025

Real estate services firm Jones Lang Lasalle projects that demand for industrial real estate will grow to 1 billion square feet within five years, because of accelerated growth in e-commerce due to the Covid-19 pandemic and the ensuing shelter-in-place policies.

E-commerce sales could hit $1.5 trillion by 2025, according to JLL, which the real estate services firm said would increase demand for warehouse fulfillment space and other industrial real estate to an additional 1 billion square feet.

Last year consumers spent $602 billion online with US merchants, representing 16% of total e-commerce sales, according to Digital Commerce 360’s analysis of Commerce Department retail data. Combining that with new projections from the pandemic, JLL forecasted that e-commerce sales could reach as high as $1.5 trillion in five years time, adding that they are expected to increase $20% in 2020 alone.

Before the pandemic, as much as 35% of JLL’s industrial leasing came from e-commerce, but as much as 50% of its leasing activity this year has already come from related operations, according to the firm.

“Since 2011, industrial rent growth has been positive and vacancy rates have been at historic lows providing attractive, stable, long-term returns to investors,” said JLL Americas Industrial president Craig Meyer in the report. “These solid fundamentals and the fact that e-commerce still has a long runway for growth makes industrial real estate the darling of the commercial real estate industry.”

E-fulfillment operations are among the most space-intensive users of logistics real estate, said Chris Caton, the head of global strategy and analytics for Prologis, a global owner, operator and developer of logistics real estate.

“Prologis estimates these customers require 1.2 million square feet of distribution space for each $1 billion in sales, which means e-commerce requires three times the space as traditional through-put distribution,” Caton said.

Online grocery has been one of the fastest-growing areas of e-commerce, according to JLL, which projected that cold storage facilities alone will grow by as much as 100 million square feet to keep up with demand. The pandemic has sparked a sharp increase in online grocery shopping as many households experimented with digital ordering for the first time, with the trend likely to continue post-pandemic, the firm added.

“E-commerce has  fundamentally changed the way consumers buy as well as their expectations for delivery,” making it “one of the biggest game-changers to supply chain management since the introduction of the world wide web and the internet,” said JLL’s global supply chain and logistics consulting leader Rich Thompson.