During the COVID-19 pandemic, the world witnessed an unprecedented surge in e-commerce. Lockdowns and social distancing measures forced people around the world to adapt to new ways of shopping, primarily moving essential items to online platforms. This change has led to impressive growth in e-commerce, with the market expanding by 43% in 2020. This is much faster than last year’s growth.
This boom in online shopping has sparked a “gold rush” in industrial warehouse development. In 2020, industrial land construction nearly doubled compared to 2019, reaching approximately 276 million square feet. By 2022, this number has increased slightly to 280 million square feet.
However, this rapid pace of development of industrial real estate is starting to more closely match demand. Factors such as rising interest rates and inflation are contributing to this trend. In particular, construction costs in 2022 increased by 14.1% compared to the previous year, suggesting a slowdown in industrial development.
This slowdown has significant implications for the broader real estate market. First, investors, including well-resourced ones like Blackstone, are diversifying their portfolios by investing in different types of real estate. This movement has resulted in higher prices in these new areas. Second, the slowing pace of new industrial development is preserving the value of existing properties, especially properties that are already leased.
Industrial real estate has proven to be a lucrative investment for early entrants. Other investors continue to recognize the sector’s potential and stability as a viable investment option. In line with the continued growth and needs of the e-commerce sector, we are ready to resume construction activities when market conditions improve again.
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