Thursday, July 26, 2018

Airbnb Model to Help the Shortage of Industrial Warehouse Space?

Chuck Sudo, Bisnow Chicago
With e-commerce exploding — it accounted for nearly 13% of total retail sales last year and is expected to grow to 17% by 2022 — it may seem like a sure bet to get into the space. List goods online, find a warehouse, ship to your customers, money rolls in, right? Not so easy if you are a small e-tailer. The majority of e-commerce distribution is dominated by Amazon and other e-tailers capable of absorbing scale, while smaller companies can be stuck scrambling for ways to fulfill their orders. Most often, these small companies find themselves distributing their inventory to fulfillment centers controlled by the big e-commerce companies, which increases costs that are passed down to the consumer. Can the sharing economy provide an answer?

The impact of e-commerce on the performance of industrial real estate is in the numbers. Q1 2018 National Industrial Market report revealed 5.2% overall vacancy, and over 101M SF of new warehouse construction brought to market in 2018’s first half. Nearly 1B SF of new warehouse supply has entered the market from 2014 through the end of the year, yet analysts believe demand will continue to outstrip supply.  "There is a sea change in the way companies are implementing their distribution business, and it's requiring additional warehouse space, which is really being driven by the Amazon model. This has had a direct impact on the demand for space." There are too many tenants and not enough property. One solution may be to bring the Airbnb model to the $163B warehousing business. Startups like Flexe and Stord connect businesses in need of warehouse space with warehouses with excess capacity. There is room in the warehousing industry for startups like Flexe and Stord. Flexe commissioned a survey of over 100 warehouse executives across a variety of businesses — of which 63% earned over $100M in revenue — to determine the percentage of actual utilization of space versus occupancy.

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