While the recent pandemic created challenges for many segments of the commercial real estate market, there has been tremendous growth in warehousing and distribution as a result of record growth in e-commerce.
Between 2019 and 2020 US e-commerce grew by an estimated 33%, from approximately $600B to $800B. US e-commerce as a percent of retail sales grew from 12% in 2019 to an estimated 16% in 2020. IBM’s US Retail Index suggests that the pandemic accelerated the transition to e-commerce by 5 years.
As a result of the record growth of e-commerce, retailers and online shopping platforms have engaged in an arms race to meet consumer demand for speed and convenience. In order to reduce shipping times and minimize costs companies are focusing attention on ‘last mile delivery’ strategies. Consumer delivery is the last and shortest link in the supply chain but can account for 40% of costs.
Micro Fulfillment Centers (MFC) are small-scale warehouses, usually less than 10,000 sf, located close to consumers and designed to fill e-commerce orders or store pickups quickly and cost effectively. MFCs can be located within or adjacent to a store, custom-built warehouses with automation, or repurposed real estate. The ‘dark store’ strategy allows vacant retail space to be converted to MFCs.
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