The Benefits of Investing in E-commerce Real Estate

Investing in e-commerce real estate has become an increasingly popular option for investors, homeowners, and real estate agents alike. This type of investment offers numerous benefits, including the potential for high returns, diversification, and the ability to capitalize on the growing trend of online shopping. In this article, we will explore the many advantages of investing in e-commerce real estate and provide valuable insights for those considering this type of investment.

What is E-commerce Real Estate?

E-commerce real estate refers to properties that are primarily used for online retail businesses. These properties can include warehouses, distribution centers, and fulfillment centers, which are essential for the storage, packaging, and shipping of products sold online. As the e-commerce industry continues to grow, the demand for these types of properties has also increased, making them an attractive investment opportunity.

High Returns on Investment

One of the main benefits of investing in e-commerce real estate is the potential for high returns on investment (ROI). As more consumers turn to online shopping, the demand for e-commerce properties has skyrocketed, leading to increased rental rates and property values. According to a report by Prologis, e-commerce properties have experienced a 20% increase in rental rates over the past five years, outpacing traditional retail properties.

• Case Study: In 2020, Amazon announced plans to open 1,000 small delivery hubs in cities and suburbs across the United States. This expansion is expected to drive up demand for e-commerce real estate and lead to higher rental rates and property values in the surrounding areas.

Diversification

Investing in e-commerce real estate can provide diversification to an investment portfolio. By adding e-commerce properties to a mix of traditional real estate investments, investors can reduce their overall risk and potentially increase returns. This is because e-commerce real estate is less susceptible to economic downturns and changes in consumer preferences than traditional retail properties.

• Example: During the COVID-19 pandemic, many brick-and-mortar retail stores experienced significant declines in sales, while e-commerce businesses thrived. Investors with exposure to e-commerce real estate were better positioned to weather the economic downturn than those with investments solely in traditional retail properties.

Capitalizing on the Growth of Online Shopping

Investing in e-commerce real estate allows investors to capitalize on the continued growth of online shopping. According to Statista, e-commerce sales in the United States are expected to reach $843 billion in 2021, a 39% increase from 2019. This growth is expected to continue in the coming years, creating a strong demand for e-commerce properties.

• Statistic: A report by eMarketer predicts that e-commerce sales will account for 15.5% of total retail sales in the United States by 2022, up from 10.9% in 2018.

Lower Maintenance and Operating Costs

E-commerce properties typically have lower maintenance and operating costs compared to traditional retail properties. This is because e-commerce properties do not require the same level of upkeep, such as landscaping, parking lot maintenance, and storefront improvements. Additionally, e-commerce properties often have lower utility costs, as they do not need to maintain the same level of lighting, heating, and cooling as traditional retail spaces.

Long-term Tenant Stability

E-commerce tenants often sign long-term leases, providing stability and consistent rental income for property owners. This is because e-commerce businesses require significant investments in infrastructure, such as conveyor systems and automated storage and retrieval systems, making it more difficult for them to relocate. As a result, e-commerce tenants are more likely to commit to long-term leases, providing property owners with a steady stream of rental income.

Increased Demand for Last-Mile Distribution Centers

As e-commerce businesses strive to meet consumer expectations for fast delivery, there has been a growing demand for last-mile distribution centers. These facilities are located close to densely populated areas, allowing for quicker delivery times to consumers. Investing in last-mile distribution centers can provide investors with an opportunity to capitalize on this growing trend and benefit from the increased demand for these types of properties.

• Example: In 2019, Prologis acquired a 4-million-square-foot portfolio of last-mile distribution centers in the United States for $1.1 billion, highlighting the growing interest in these types of properties among institutional investors.

Conclusion

Investing in e-commerce real estate offers numerous benefits, including the potential for high returns, diversification, and the ability to capitalize on the growing trend of online shopping. As the e-commerce industry continues to expand, the demand for e-commerce properties is expected to increase, providing investors with attractive investment opportunities. By understanding the advantages of investing in e-commerce real estate and considering the various factors discussed in this article, investors can make informed decisions and potentially achieve strong returns on their investments.