No Slow Downs Ahead
Amazon has become more than just a household name. As the company continues to expand its market share in e-commerce, it has also steadily built an industrial real estate empire. In large cities, like Chicago, Amazon has been especially busy. In June, Amazon announced two new warehouses in the Chicagoland suburbs that would employ 2,000 people combined.
The e-commerce power house has been quietly acquiring properties in Kenosha, Skokie, Downers Grove (pictured below by Costar) and University Park while promising thousands of jobs along the way. These key purchases have caught the eyes of many investors, including the well known private-equity firm KKR, who paid a record $176 million for the Kenosha fulfillment center. KKR acquired a total of 1.5 million square feet to seal the deal for the highest price ever paid for one industrial property in the Chicago market.
E-commerce is surging as consumers continue to avoid crowded stores and rely on the efficiency of online shopping. While big players like Amazon are seeing record-breaking sales, investors are also riding the wave. Supply chain disruption caused by the pandemic are expected to increase demand for warehouse space and create changes in storage and logistics. WSJ reports that companies who connect businesses with warehouses with space to share are already seeing a surge in demand from retailers and brands overwhelmed by online orders.
The breakdown in supply chains have already shown many businesses that now is the time to embrace new technologies. With artificial intelligence and big data evolving at a rapid rate, we are bound to see new and innovative technologies take over the warehouse industry. According to Crain's Detroit, Firms need to develop new processes "to shorten disruption detection time, forge new types of partnerships to overcome supply shortages...develop better regional demand sensing, and automate."
Industrial real estate was naturally a strong contender leading into the pandemic, but now as consumer demand shifts, we are seeing a large shift in the supply chain. Cold storage facilities will continue to see a significant rise in demand, as people become accustomed to buying groceries online and dining at home.