The rise of e-commerce has revolutionized the way we shop and interact with retail businesses. As of this year, 2.64 billion consumers have bought items online – more than 33 percent of the global population. Post COVID, Commercial real estate (CRE) has been significantly affected by this digital transformation in a number of ways.
E-commerce has given consumers the option of convenient online shopping from the comfort of their homes. As a result, traditional brick-and-mortar stores have encountered challenges, with some even facing closures or downsizing. This has left many commercial property owners and investors searching for ways to adapt.
The Challenges
In a digital world dominated by e-commerce giants, brick and mortar stores face daunting challenges. With the convenience of online shopping, consumers now expect faster deliveries and personalized experiences. Many traditional retailers are looking for ways to meet these new demands and remain competitive.
Running physical stores comes with significant overhead costs such as rent, utilities and maintenance. These stores are obviously confined to specific locations, making it difficult to reach customers beyond their immediate vicinity. As a result of these and other factors, businesses such as Walmart, Foot Locker and Bed Bath & Beyond have shut down many of their locations, part of a wave of 2,000 nationwide closures during the past year and a half – with many more expected.
Advantages
Of course, that doesn’t mean brick-and-mortar stores are without advantages. Many shoppers appreciate the guidance and input they get from salespeople. It’s often an important plus to be able to touch products and see them in person.
Certain items, such as cars, pose difficulties when it comes to online shopping. Physical stores have the advantage of offering a wide range of products. These vary from large, costly goods to small, affordable items. And with the inventory being largely onsite, there’s seldom a need for shipping.
Physical stores can enjoy an edge in visibility. An online store that doesn’t show up on the first page of Google and other search engines is practically invisible. Brick-and-mortar stores in a busy location don’t have this same problem.
New Opportunities
While e-commerce has posed challenges to traditional retail spaces, it has created exciting opportunities for warehouses and fulfillment centers in Florida’s CRE market. These opportunities benefit investors looking to capitalize on the growing demand for e-commerce logistics.
E-commerce companies require large warehouses and fulfillment centers to store inventory and meet customer demand efficiently. This increased demand has led to a surge in the development and leasing of such properties.
According to CoStar data there are 53.6M SF of inventory over 3,234 industrial properties in Manatee, Sarasota and Charlotte counties. At the time this article was written, another 2.1M SF (10.5% increase over last year) of industrial space was under construction and current vacancy rates for the market are 1.5%.
Property Conversion and Logistics
As some brick-and-mortar stores close or downsize, there’s potential for adaptive reuse of these spaces into warehouses or last-mile fulfillment centers. This transformation breathes new life into underutilized properties.
Some investors are also recognizing the lucrative potential of logistics real estate due to the boom in e-commerce. As a result, there is growing interest in acquiring warehouses and fulfillment centers as a viable investment strategy. Many such facilities have sprung up here in Florida and are operating successfully.
Another positive consequence of the e-commerce revolution is the creation of jobs in the logistics, warehousing and fulfillment sectors. For example, Amazon hired more than 59,000 employees in Florida between 2010 and 2022 to staff its fulfillment centers. This has made a positive impact on local economies, driving real estate demand.
E-commerce continues to reshaped the CRE landscape in Florida and across the country. While traditional stores face challenges in adapting to the digital world, there are fresh opportunities emerging in the form of warehouses and fulfillment centers. As Florida continues to embrace e-commerce, professionals in the real estate industry must remain forward-thinking to thrive in the digital era.