Buying land on which to build a warehouse is becoming an increasingly pricey proposition. As two-day shipping becomes heavily favored among consumers, eCommerce firms are under mounting pressure to locate their warehouses and distribution centers as close to their customer bases as possible.
According to Wednesday (Jan. 3) reports from technology news source Recode, that means these firms need large tracts of industrially zoned land near major cities — something that is not exactly easy to come by. Though construction is starting to meeting demand, according to reports, it is difficult to keep up the pace.
That is putting upward pressure on land and real estate prices. In some cases, that upward pressure is steep — to the tune of approximately $100,000 per acre from the nearly $50,000 an acre price common a year ago, according to real estate firm CBRE. The cost for the smaller, so-called “last mile” warehouses within easy access of urban zones can cost as much as $250,000 an acre, up 25 percent year-on-year.
Rental prices for industrial have followed the trend.
Looking to reverse the skyrocketing costs has led to some out-of-the-box thinking, including suggestions for repurposing unused spaces. Shopping malls and other underutilized retail centers have been considered as one possibility, but plans for such a solution are still in early phases.
Another option would be simply raising the costs of shipping, as eCommerce firms are subsidizing those fast shipping times — and that is becoming a spendy proposition. The problem is that Amazon is very unlikely to drop its sought-after benefit. After all, it is one of the main drivers of its Prime program, and that means it will be hard for anyone else in the eCommerce business to back off, either.
It seems, for the time being anyway, that industrial prices are widely forecast to stay put. The pressures eCommerce is putting on the market seem unlikely to vary much in the near future.
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