E-com continues to firmly drive logistics real estate demand: Prologis

As penetration rises, companies are recalibrating supply chains to optimise delivery speeds, fuelling demand for well-located logistics space.

These structural shifts will continue shaping industrial real estate, keeping demand elevated as digital commerce scales further, the company said in a recent paper.

US companies increased logistics footprints while shrinking retail footprints over the past five years. As online revenues drive growth and reach sufficient scale, retailers have been rebalancing their real estate strategies accordingly.

Since the pre-pandemic period, occupied US logistics space has grown 12 per cent while occupied retail space (excluding services retail) has shrunk by 2.4 per cent.

US e-commerce penetration is projected to reach 30 per cent by 2030, up from 24 per cent today. This share shift alone would produce a total of 250 to 350 million square feet of US logistics space demand over the next five years, noted the Prologis paper.

Cross-border e-commerce is a growth segment. With sales for top platforms more than doubling in 2024 to an estimated $44 billion in the United States, cross-border e-commerce expansion is spurring demand for logistics space in gateway markets and last touch distribution locations.

Asian third-party logistics (3PL) players (primarily Chinese) are key enablers. In 2024, such players accounted for nearly 20 per cent of US industrial new leasing, particularly in Southern California and the Northeast. Early data suggest this segment could comprise a similar proportion in 2025, the paper noted.

Importers began to act more than a year ago in anticipation of the possible removal or reduction of de minimis provisions in trade regulations. Fast-fashion and e-commerce platforms such as Shein, Temu, and TikTok Shop have accelerated this shift.

As online revenues drive growth and reach sufficient scale, retailers have been rebalancing their real estate strategies accordingly. Since the pre-pandemic period, occupied US logistics space has grown by 12 per cent while occupied retail space (excluding services retail) has shrunk by 2.4 per cent.

Recent leasing activity is concentrated in major logistics hubs. In 2024, 55 per cent of e-commerce leasing in the United States occurred in three primary markets—Southern California, greater New York City and Chicago—predominantly in big-box submarkets as companies sought to capitalize on scale and improve upstream operations.

Consumer expectations are accelerating demand for urban warehouses. In 2024, 76 per cent of consumers expected free returns—compared to just 40 per cent in 2019—and 70 per cent anticipated same-day or next-day delivery. To meet these demands, retailers will continue to recalibrate warehouse locations and fulfilment strategies and drive increased leasing near urban centres.

This shift enhances service levels and enables faster deliveries, further reinforcing online sales growth and the need for distribution and fulfilment centres. However, this does not mean physical retail is dead. Certain retail formats are thriving as the occupier mix shifts from predominantly goods purveyors to a more diverse mix of high-value services, experiences and shopping.

Despite steady growth, continental Europe’s e-commerce penetration holds at just 10 per cent, well below the United Kingdom’s 33 per cent, highlighting significant potential for expansion.

Asian e-tailers such as Shein, Ali Express and Temu have rapidly gained ground. With e-commerce expanding at over 5 per cent annually in Europe, 15-20 million square feet of logistics space per year will be needed in the next five years, the paper remarked.

The 3x multiplier still holds after a decade and is amplifying the impact of e-commerce outperformance on logistics demand.

E-commerce penetration growth translates directly into increased demand for industrial space. For every 1 per cent increase in e-commerce share in the United States, 50-70 million square feet of industrial space are absorbed.

Based on a projected share shift to 30 per cent of goods sold online by 2030, e-commerce would drive 250 million to 350 million square feet of net absorption by 2030, Prologis added.

ALCHEMPro News Desk (DS)