Accelerated e-commerce growth spurred by the onset of the global pandemic has brought logistic real estate into focus. Typically real estate spend amounts to roughly 5% of a company's supply chain cost, yet that small allocation in spending is having a deep impact on the success of supply chains.
"The choice of the real estate—while it may seem like a smaller dollar allocation—is an enabling capability for supply chains to compete and win for revenues," explained Chris Caton, senior vice president of global strategy and analytics at real estate investment firm Prologis during an education session at the CSCMP EDGE Live! Conference. In fact, Caton has noticed a trend with companies looking to establish a larger network of distribution facilities located near their end customers.
Caton, along with his co-presenter Melinda McLaughlin, vice president of research at Prologis, discussed how the pandemic essentially caused five years of e-commerce growth to be collapsed into a five-week time frame. This rapid increase of e-commerce adoption by retailers changed the essential nature of logistics real estate and increased demand for larger spaces to handle more inventory and fulfillment operations.
With an expected inventory growth of 5 to 15% post pandemic, companies will need to find spaces to house additional inventory. "Emerging from this crisis, companies will not only be facing challenges from e-commerce adoptions that were fast-forwarded by five years, they will also have to adapt to these inventory challenges," noted McLaughlin.
As companies adapt to a post-pandemic world, the speakers pointed to several emerging trends: the adoption of automation technology, increased information technology investment, and higher demand for real estate in dense, urban areas.