Why big warehouses are hot real estate right now?
If you haven't yet noticed, everyone is spending a lot more time at home and a lot less time out and about. This includes less time shopping. American malls, which were once a bustling hub of consumer activity, there are now covered with "for lease" signs beckoning the next naive store owner to try their hand at a brick-and-mortar store, which will likely fail. And while mall real estate is suffering, warehouse real estate is booming. A recent CNBC article had a headline that began "U.S. needs more warehouses . . ." So why are warehouses such hot real estate right now?
The answer lies in the new purchasing habits of consumers.
When the world went into lockdown mode, people still needed to buy things. As long as there's money to spend, people will spend it. And if they're unable to physically go to a store to purchase their stuff, they'll do so online. With the mass migration of consumer spending going online, e-commerce companies needed to increase their throughput abilities in order to keep up with demand. And for many companies, increasing throughput for online order fulfillment required the expansion of warehouse space. Experts predict that the United States will need to add nearly 2 billion square feet of warehouse space in the next decade to keep up.
Here are a few examples of companies that have expanded their warehouse real estate footprint BIG TIME since the onset of the pandemic.
Melaleuca: Added 500, 000 square feet of warehouse space in Kansas City
AmWare: Also added half-a-million square feet of warehouse space.
In addition to companies scrambling to expand their warehouse footprint, savvy investors are piling on, too. Realizing that there is a massive demand for warehouse space, Stockbridge Capital Group swooped in this year and acquired 23 warehouses for $2 billion.
There's no question that the consumer landscape is changing, and in fact has changed in a dramatic way. The question now is, which companies will adapt to these changes and which companies will not. It really is an existential crisis for business owners.