CBRE: U.S. Needs 330M Square Feet of Distribution Space to Meet eCommerce Demand

CBRE, Dallas, estimated the U.S. will need an additional 330 million square feet of distribution space by 2025 just to handle projected increases in online ordering.

In a new report, Global E-Commerce Outlook 2021, CBRE said e-commerce penetration could grow to 26 percent of all retail sales by 2025, which would require much more industrial space.

“E-commerce has grown steadily over the years, and it will continue at a strong pace for the foreseeable future,” said John Morris, Executive Managing Director and Leader of CBRE’s Americas Industrial & Logistics and Retail businesses. “As a result, distribution and supply chain networks will continue to be under pressure to meet demand at a time when industrial vacancy is at record low levels.”

Morris said the U.S. will need significant new construction in the next few years to keep pace with this demand. CBRE calculated the incremental demand based on its estimate that every additional $1 billion of e-commerce sales requires 1 million square feet of new distribution space. It said U.S. e-commerce sales could increase by $330 billion from 2020 to 2025.

The anticipated demand for 330 million more square feet of distribution space represents 27 percent of the projected overall demand for industrial real estate, the report said.

“While there is a sizable construction pipeline in the U.S., much of that new space already is leased to meet the demand of the past few years,” said James Breeze, Senior Director and Global Head of Industrial & Logistics Research with CBRE. “Moving forward, the challenge in many U.S. and global markets will be to produce enough new facilities to meet this rapidly expanding market.”

Breeze noted e-commerce drives only a portion of the overall demand for distribution facilities. “Traditional retailers, third-party logistics companies and others will also be demand catalysts,” he said. “If developers can’t build facilities fast enough, we could see rental rates push well beyond their current record highs.”