21 Jan The Industrial Boom of 2020
2020 was a devastating year for many businesses and the economy. Even prior to Covid-19, brick and mortar stores were suffering, but the pandemic put the nail in the coffin for over one
hundred thousand businesses. During the pandemic, we were banned from our offices, family gatherings were frowned upon, and restaurants and stores were shutdown. Nonetheless, it was
also a year where businesses and personal lives were reinvented. Our resiliency and adaptability kicked in – we worked from home, connected with family via Zoom and shopped exclusively online.
2020 was the year of reinvention and many businesses reinvented themselves. They changed their business model and took a page from Amazon’s playbook to cater to online shopping with
fast delivery. Last year, department store sales declined almost overnight while Amazon’s stock surged 76% and ecommerce sales grew by an estimated 40%.
With ecommerce soaring there was an immediate demand for storage space. In order for smaller businesses to keep up with the likes of Amazon Prime, they had to strategically locate
distribution warehouse spaces across the country. The industrial commercial real estate market was flooded with prospective tenants. During a year in which almost every industry
underperformed, industrial real estate grew dramatically. At Scheer Partners alone, our industrial division saw a whopping 40% increase last year.
Pre-pandemic trends indicate the rise in ecommerce sales isn’t a temporary fad. Even prior to the pandemic, big companies such as Walmart changed their business platform to compete
with Amazon, revamping their website to include multiple vendors and free overnight delivery options. The demand for ecommerce distribution centers is only going to expand over the next
5-10 years. In fact, Yahoo Finance predicts “ecommerce sales could hit $1.5 trillion by 2025” continuing the warehouse/industrial space boom.
What we saw in 2020 was an acceleration of commercial real estate’s love affair with industrial. Warehouses and distribution centers will become even more valuable in 2021. Experts at
Harvard Business School predict the retail shopping experience could eventually be replaced by showrooms to maintain the desire for a visual and social shopping experience; “window
shopping” will become a literal term with curbside pick up and next day delivery.
The economy took a big hit in 2020, but I am confident we are going to see a bounce this year. Covid-19 changed how we live and how we shop. I’m looking forward to watching as the next
few years determine the path for ecommerce and the future of industrial commercial real estate.
I would love to hear your thoughts.
Robert Scheer, Founder & President
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