The Friday Report: April 16th, 2021

Warehouse Rents Rising in Response to Supply Shortage

The warehousing industry is roaring forward in 2021.  With the lockdowns due to the COVID-19 pandemic in 2020, the growth of omnichannel e-commerce was tremendous.  This led to the need for more warehouses, distribution centers, fulfillment centers and other similar facilities positioned in proximity to consumer populations for quick delivery.

Markets with population increases, especially those with major air hubs, rail or inland ports are seeing significant escalations in demand for warehouse space.  These markets include Columbus, Ohio, Phoenix, Arizona and Memphis, Tennessee.

Here is a quick at the industrial real estate market share:

• E-commerce exclusive facilities: 27%
• Third party logistics: 26%
• General retail and wholesale: 25%

Lack of adequate supply has led to warehouse rents rising quickly, requiring that companies become more flexible in terms of selecting warehouse locations.

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Chipotle Pushes Forward to Support Local Farmers and Use Organic Produce

Last year, Chipotle was successful in locally sourcing 31 million pounds of its produce from “54 unique local farmers”.  This represented 11% of its total requirement and included black beans, cilantro, tofu and avocados.  Working hard to meet its pledge to increase its usage of organic and locally sourced produce, Chipotle has established a goal to source 37 million pounds of produce by the end of 2021.

Furthering its commitment, Chipotle also committed to create a virtual farmers marketplace for direct-to-consumer purchasing and will contribute $500,000 to the next generation of farmers.  Chipotle has linked compensation for its executives to environmental, social and governance goals.  This effectively ties 10% of annual incentives to the achievement of its organic-sourcing initiative for 2021.

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Amazon Continues to Absorb Obsolete Shopping Malls

Did you know that between 2016 and 2019 Amazon converted approximately 25 shopping malls into warehouses?  Last year, it was publicly reported that Amazon was in talks with Simon Property Group, the largest owner of shopping malls in the United States to convert bankrupt Sears and JCPenney stores into fulfillment centers.  According to industry estimates, nearly 50 percent of the department stores in American shopping malls could be permanently closed before the start of the new year.

Amazon Prime Delivery service relies on a national network of over 100 fulfillment centers and approximately a million workers to transport goods to the doors of customers within a day.  COVID-19 simply accelerated what had already been happening.  Amazon experienced an increase of 37 percent in net sales in 2020 compared to that of 2019.  A reinvestment of $44 billion in capital expenditures helped increase its fulfillment center footprint by 50 percent in 2020 as compared to that of the previous year.

For more information, please continue reading here.