The Warehouse Boom

The Transition From Retail Space to Warehouse Space

The transition from brick-and-mortar shopping to ecommerce was happening even before the pandemic, but it has been significantly accelerated as the virus continues to spread and people avoid going to traditional stores. This means that demand for warehouse space is surging while demand for traditional retail real estate is down. As a result, retail space across the country is being converted to warehouse space.

A recent study showed that since 2017, 14 million square feet of retail space has been made into 15.2 million square feet of industrial space. This is still a relatively minor segment of the 14.5 billion square feet of industrial real estate in the US, but some analysts see this as the beginning of a much larger shift.

Warehouses Move to Urban Centers and Existing Stores

As demand for online shopping grows, ecommerce warehouses are popping up in new types of locations. For example, ecommerce warehouses have a growing presence in urban centers, which have long been hubs for traditional retail.

Ohi, a warehouse startup, is capitalizing on this trend. The company partners with landlords to convert space normally used for offices and retail into micro-warehouses. These warehouses allow large and small brands to give urban customers same-day delivery.

Many companies are also converting parts of their brick and mortar stores into warehouses to serve ecommerce customers. This strategy has been popular among mid-sized retail chains, like Albertsons (ACI) and Wakefern Food. Retail giants like Walmart (WMT) and Target (TGT) are also creating systems to ship products directly from their stores.

Potential for Job Creation

Though changes in business models always create challenges and concerns, one encouraging statistic has come out of the transition to warehouse-centric shopping: According to Michael Mandel, Chief Economic Strategist at the Progressive Policy Institute, the jobs created by the ecommerce boom outweigh the jobs lost due to traditional retail declining for the period between 2007 and January 2020.

While the pandemic has led many companies to slash jobs, analysts expect demand for ecommerce to stay strong even after the pandemic subsides. This trend could lead to the creation of more jobs in fulfillment, delivery, and related ecommerce roles.

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