Room To Build: Secondary Logistics Markets To Benefit As E-Commerce Players Move Closer To Customers

Though e-commerce gains have been wreaking havoc in the retail industry, industrial real estate is booming as users push in closer to customers, absorbing more and more space.

Earlier this month CBRE reported that pre-leased commitments for warehouses under construction have reached new highs. Now it seems secondary markets stand to gain. Secondary distribution and warehouse markets like Denver, Cincinnati, Louisville and Portland are expected to benefit from an influx of new supply as e-commerce players build out and modernize their supply chain, CBRE reports.

These secondary markets are poised for growth for two reasons: one, there is simply more room to build in those markets, and two, companies are looking to expand their supply-chain presence to cover more regional locations. Since 2011, most new warehouse development has been concentrated in the top 13 primary markets, such as Atlanta, Chicago and greater Los Angeles; these markets saw average rents increase by 30% and a 4.9% drop in vacancies in the last six year.

“As infrastructure for e-commerce fulfillment expands, the industry will seek to expand its real estate footprint in secondary markets to better cover a larger portion of population centers and increase delivery speeds,” CBRE Americas Head of Industrial & Logistics Research David Egan said in a statement. “As this unfolds, second-tier industrial markets … offer ideal fundamentals for developers and e-commerce companies looking to expand their supply chains.”