Connect Media > California News > Top California > Prologis: COVID-19 Could Drive 400M SF of New Supply Chain Logistics Demand

May 21, 2020 Comments Off on Prologis: COVID-19 Could Drive 400M SF of New Supply Chain Logistics Demand Views: 2124 California News, Top California

Prologis: COVID-19 Could Drive 400M SF of New Supply Chain Logistics Demand

Order Reprints...

The latest research by San Francisco-based Prologis on COVID-19 and its implications for logistics real estate breaks down what may be ahead for the sector. The report provides insights into the third phase of the global pandemic, defined as “the normal,” including quantifying the potential increase in long-term demand from higher inventory levels and accelerated e-commerce adoption.

The report’s authors say, “We expect that lessons learned from the pandemic will add demand tailwinds to logistics real estate in the “new normal.” Growth in direct-to-consumer delivery volumes and rapid replenishment needs should continue to emphasize the appeal of logistics real estate that is closer to end consumers.”

Among the findings are that accelerated e-commerce adoption and higher inventory levels have the potential to generate 400 million square feet or more of additional U.S. logistics real estate demand, or 150 to 200 million square feet per year for two to three years.

Re-tooling supply chains for increased e-fulfilment should create incremental net demand of 140 to 185 million square feet in total. E-fulfilment demand should be highest in locations near end consumers.

Inventories could increase by 5% to 10% in a bid for resiliency, producing 285 to 570 million square feet of aggregate incremental demand. New demand from inventory growth could be spread more evenly throughout distribution networks.

Each 100 bps of share shift from bricks and mortar to online translates to 46 million square feet of net demand in the U.S. With the penetration rate already rising by 100-150 bps annually, March through mid-April’s e-commerce growth of more than 30% suggests that the rate could rise by 300-400 bps in 2020, generating an incremental 140 to 185 million square feet of net demand (accounting for cannibalization of bricks and mortar).

The report’s authors note some of this demand has already surfaced in the race to respond to the coronavirus pandemic, but the reality of implementing this expansion in distribution capabilities may take more than a year to complete.

Read more at Prologis COVID-19 Special Report

Connect With Prologis


Get CRE News in 150 words

For comments, questions or concerns, please contact Dennis Kaiser

Tags: , , , ,

Comments are closed.