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A research report from real estate investment trust Prologis said a fast-growing e-commerce segment continues to up the need for logistics warehousing space. The current trend is expected to generate demand for an additional 250 million to 350 million square feet of space over the next five years, the company said.
E-commerce sales increased 8% year over year in 2024 (10% higher on an inflation-adjusted basis) versus in-store sales, which increased just 1.8%. E-commerce sales accounted for 16.1% of total retail sales, an 80-basis-point increase y/y and 490 bps higher than the last reading prior to the pandemic, according to the Census Bureau. (Prologis estimates e-commerce’s penetration rate of “core retail goods sales” is 24% currently.)
E-commerce accounted for more than half of all retail sales growth last year and has grown at a 16% compound annual growth rate the past five years versus a 5% growth rate for traditional brick-and-mortar retail.
“Several years out from the exogenous forces of the pandemic and subsequent re-opening, recent consumer behavior reflects a return to long-term priorities: value, convenience and choice,” the report said.
The data showed occupied logistics space has increased 12% since 2019 (pre-pandemic) while retailers have culled space by 2.4%.
“Retailers are adjusting store footprints, with store closures surging in 2024 to the highest levels since 2020,” the report said. “As inventory and operations shift to logistics facilities, trends like showrooming, smaller-format stores, and restricted in-store stock are reducing onsite availability while increasing the need for rapid replenishment and fulfillment from nearby warehouses.”
In addition to the convenience that at-home shopping provides to consumers, shrinking retail footprints are expected to provide another catalyst for e-commerce sales, which Prologis (NYSE: PLD) estimates could total 30% of core retail goods sales by 2030.
Concerns over a changing trade landscape are driving cross-border e-commerce demand and leasing activity higher, the report said. Large e-commerce operators Shein and Temu are incorporating more domestic third-party sellers into their networks, essentially broadening their U.S. footprints.
Asian 3PLs accounted for almost 20% of new industrial leasing in the U.S. during 2024 and remain on a similar pace so far in 2025. Some of the activity has been in response to potential changes in the way low-value, or de minimis, imports could be treated. (Goods valued at $800 or less are currently exempt from import duties in the U.S.)