What does the rise in e-commerce mean for commercial real-estate?
How the online market is affecting in-person shopping.
Over the last two years there has been a huge rise in e-commerce. Due to so much of the world being locked down for the vast majority of this time, consumer habits were forced to change and adapt to the new circumstances. But even now, as we navigate our respective ‘new normals’, online shopping is holding firm as a top mode of commerce. This begs the question: what does the rise in e-commerce mean for commercial real-estate?
STORAGE & DISTRIBUTION BOOM
Space to store and distribute stock is essential for e-commerce businesses – without it they simply wouldn’t function. Due to this, there has been a marked increase in demand for storage units and distribution sites in the last two years, especially for spaces that are close to major cities.
The demand for spaces close to major cities is due to the ability provided to drastically reduce shipping times to the citizens of these cities. By cutting down on the time between a consumer placing an order and them holding the product in their hands, companies can gain a competitive advantage within the market.
SHIFT IN SPACE DEMAND
With more transactions being done online, it makes little sense for companies to maintain such large physical retail spaces. Decreased demand for in-store shopping means that less inventory needs to be held in stores, which in turn means that less space is needed.
Of course, some commerce sectors are always going to need the same large spaces that they always have – for example, grocery shops and other essential businesses. But, it’s the non-essential, recreational stores that are being seen to downsize.
This may seem like something of a step back, moving from what has historically been an end goal of commerce businesses – stocking products in a dedicated physical store – but the increase in e-commerce activity could result in a better bottom line. With fewer overheads and changed outgoings, companies could end up seeing a boost to their profits thanks to this shift.
One of the great benefits of shopping online is the technology of it. It’s smooth, easy to manage, and quick. Commercial real-estate developers are aware of this, and in order to support physical stores and ensure their longevity within the market, they are looking at ways to integrate more technology into physical retail spaces.
Technological features can allow customers to virtually try on products with ease, they can provide additional information on products at the click of a button, and they can personalize the shopping experience based on past consumer behavior. The ultimate goal for integrating technology into physical stores is to help people have a smoother in-store experience with minimal fuss – in other words, to improve customer experiences.
LIKELY A BLENDED FUTURE
If nothing else, the recent growth of e-commerce alone will likely push companies to adopt at least a blended model of working. Stores are expected to become smaller and feature more tech than before, while distribution centers and warehouses will be bigger than ever. This is the best of both worlds, with the market benefits of both in-store and e-commerce being accessed by both companies and consumers.
Ultimately, it looks like e-commerce is here to stay as a strong competitor for in-person retail. Due to this, commercial developers and investors would be wise to create spaces that are flexible, that can be tailored to suit the needs of both online and in-person shopping, in order to stay competitive within the development market and maximize a return from property.
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