By John Jordan

Orange County, which was already a very strong warehouse/distribution/logistics market prior to the onset of the Coronavirus pandemic with two major facilities now under construction for Amazon and Medline Industries, Inc., will no doubt benefit in the years to come from the significant changes taking place in consumer behavior that is causing a strain on inventory levels and supply chains.

A recently released report by Miami-based real estate investment firm Elion Partners entitled “Logistics Real Estate—Infrastructure of a Shifting Economy,” provides a very bullish view on the future of the logistics sector due to a number of reasons, including the impacts of COVID-19 on consumer behavior.

“The pandemic is sparking vast changes among the logistics real estate space, requiring companies to adjust to fluctuations in demand, supply and labor availability” the Elion Partners report notes.

In fact, Elion Partners says, “We believe that logistics is better positioned than other real estate sectors due to the potential boost to long-term demand from E-commerce and supplier inventory needs.”

The report states that the long-term beneficial effects projected to boost demand for logistics real estate include the acceleration of e-commerce, supply chain diversification and the need to increase inventory levels.

In terms of the growth of E-commerce, the report notes that “as a result of the pandemic, quarantines are creating new online consumers and driving demand for goods bought online, fueling the need for distribution facilities at a rate much higher than the current cycle.”

Other key data points include that E-commerce sales represented 15% of total retail sales in 2019, and that share is expected to jump to 39% by 2030; online grocery in the U.S. saw a +100% boost in daily online sales and overall E-commerce in the U.S. increased by 25%, largely propelled by grocery during a two-day period (March 13-15, 2020) according to the Adobe Analytics Digital Economy Index 2020. Grocery delivery app downloads hit record levels and worldwide online searches for “grocery delivery” increased by 450%, according to Apotopia, Google Trends as of March 17, 2020 as compared to the previous period a year earlier.

Other highlights of the report include a prediction that companies and suppliers may opt to increase their inventory levels in the long term to ensure they can meet the future demand for business continuity purposes, and therefore increase the demand for warehouse space.

Elion Partners also believes that the logistics sector, which was strong entering the pandemic a few months ago, is poised for future growth citing a recent Cushman & Wakefield report which states the brokerage firm expects the U.S. economy will rebound relatively quickly with projected economic growth of 5.8% in 2021 assuming that the pandemic fades in the second half of 2020.

Elion Partners, a real estate investment firm which also has offices in New York City, sees pipeline opportunities in the following areas:

• Last-mile grocery distribution throughout New York and the five boroughs, northern New Jersey, San Francisco, Los Angeles and Seattle;

• Continuation of middle- and last-mile value-add strategy in supply constrained markets and sub-markets with specific focus on those that are exhibiting resiliency in tenant demand during the shutdown, most notably in northern New Jersey, Chicago, the D.C. metro area and South Florida;

• Responding to a “flight to quality” by acquiring existing buildings that exhibit Class A characteristics with a minimum square footage of 100,000 (square feet);

• Speculative development of Class A logistics facilities geared toward E-commerce users in target supply-constrained markets and submarkets; and

• Expansion of first-mile build-to-suit opportunities in 2021 and beyond.

To see the full report, go to: https://elionpartners.com/news/logistics-real-estate-infrastructure-of-a-shifting-economy/