Industrial REITs: Capitalizing on E-Commerce’s Last-Mile Logistics Boom
With the rise of e-commerce, the logistics industry has transformed from traditional supply chain management to last-mile delivery. This shift towards delivered goods being sent directly from warehouses to consumers has created a boom in the industrial real estate market. As e-commerce continues to soar, industrial real estate investment trusts (REITs) have become a top choice for investors looking to capitalize on this growing trend. In this article, we will delve into the world of industrial REITs and explore how they are taking advantage of the e-commerce last-mile logistics boom.
The Rise of E-Commerce
E-commerce, also known as electronic commerce, has changed the way consumers shop. With the convenience of being able to purchase items with just a few clicks, e-commerce has seen a significant increase in popularity over the past decade. In 2020, e-commerce sales reached a staggering $4.28 trillion, and the numbers are only expected to continue rising. In fact, e-commerce sales are projected to reach $6.54 trillion by 2023, as reported by Statista.
What is Last-Mile Logistics?
Last-mile logistics refers to the final step of the delivery process, where the product is transported from a warehouse or distribution center to the end consumer. This is often the most challenging and costly part of the supply chain, as it involves navigating through busy urban areas and dealing with individual delivery locations. With the rise of e-commerce, last-mile logistics has become a key focus for businesses looking to provide efficient and timely deliveries to their customers.
The Impact on Industrial Real Estate
As e-commerce continues to grow, so does the demand for industrial real estate. These properties, which include warehouses, distribution centers, and fulfillment centers, play an essential role in the last-mile logistics process. According to CBRE, industrial vacancy rates have been in decline since 2010, with record lows of 4.3% in 2019. This tightening of the industrial real estate market is a direct result of the increased demand for e-commerce fulfillment centers and distribution hubs.
Why Industrial REITs?
Industrial REITs are companies that own and operate industrial real estate properties. They offer investors the opportunity to own a piece of the industrial real estate market without having to own the actual property. Industrial REITs have become popular among investors due to their promising returns and low-risk nature. With the rise of e-commerce and the growing demand for industrial properties, industrial REITs have become even more attractive to investors.
Location, Location, Location
One of the key factors that make industrial REITs stand out is their strategic locations near urban areas. These properties are often situated near major cities, where there is a high concentration of consumers. As e-commerce continues to grow, companies need to have warehouses and distribution centers in close proximity to their customers to ensure timely and cost-effective deliveries. This makes industrial REITs valuable assets for companies looking to expand their e-commerce footprint.
Rising Rental Rates
With the increased demand for industrial real estate, rental rates have also been on the rise. According to a report by CBRE, industrial rental rates have risen by an average of 6% per year since 2012. This trend is expected to continue as e-commerce sales continue to grow. The rising rental rates translate to higher returns for investors in industrial REITs, making them an attractive option for those seeking steady and profitable investments.
Diversification
Investing in industrial REITs also provides investors with diversification, as these companies often own a portfolio of properties in various locations. This diversification helps mitigate risk as the success of one property is not tied to the performance of the entire portfolio. With a well-diversified industrial REIT, investors can rest easy knowing their investment is not dependent on the performance of a single property.
Conclusion
The exponential growth of e-commerce has sparked a boom in the industrial real estate market, with demand for warehouses and distribution centers on the rise. This trend has made industrial REITs a top choice for investors looking to benefit from the e-commerce last-mile logistics boom. With their strategic locations, rising rental rates, and diversification, industrial REITs offer a promising opportunity for investors to capitalize on the growing trend of e-commerce and last-mile logistics.
