The world is changing, including the future of the industrial real estate. Those involved in the industry need to be prepared to respond to these changes, in order to ensure that they will be able to cope with these changes and to avoid becoming outmoded.
The Future of Industrial Real Estate
The industrial real estate market was already changing before COVID-19 happened. This has not only altered the course for the industry in many ways but also accelerated many other aspects. That is to say, it has forced companies to adopt newer strategies at a faster pace. In this post, we’ll take a look at the future of the industrial real estate market in the wake of COVID-19, and as a response to the relentless and predictable march of technology.
How the Industrial Real Estate Market is Changing in Response to COVID-19
COVID-19 has changed the face of business. In addition, most predictions suggest that things won’t be going “back to normal” any time soon. The way in which businesses have been affected varies greatly depending on the nature of the organization. Some businesses for example have been forced to shut down operations entirely. This means that many companies that relied on industrial real estate before are now out of action. Some of these companies have and will ultimately be forced to cease business permanently, which will leave many premises vacant. On the other hand, many other businesses will be suddenly rushing to increase their storage and logistics. The companies that are going to require an increased amount of real estate will be those that offer eCommerce and online orders.
Companies like Amazon have been fairing extremely well since Coronavirus. For example, they are able to supply customers that have been instructed to remain at home. Likewise, they have been able to gain customers from high-street retailers that have been forced to close their doors. The demand for warehouse storage isn’t the only increase though. For instance, companies that previously only sold through physical stores are now also turning to delivery models. Moreover, those that were operating through both means are now doing more business through their online sales and less business through other methods.
What does this mean for the industrial real estate market?
It means that factories and locations that require a physical workforce might be decreasing demand. However, warehouses, storage, and factories that can rely on largely automated processes are going to be increasingly in demand. It’s important to consider the unique needs and requirements of these companies. Space for heavy machinery and plenty of power will be necessary. Likewise, storage options for maintaining temperature and other conditions will also be increasingly important and in-demand. Office space and human-driven design sensibilities might be less needed going forward.
Many of these changes might be seen as temporary reactions to new laws and virus-induced shut-downs that are unlikely to persist. However, this is far from the whole picture. It’s important to recognize that many of these changes are highly likely to persist long after things return to relative normalcy. For one, many companies have been forced to adopt more flexible work conditions for their employees. Workers are now accustomed to being able to work from home. While they may be able to return to the office, that does not necessarily mean that they will be willing to. Many companies are likewise seeing the benefits of having staff at home, which results in significant savings on rent and office space.
Another consideration is that all this represented a good example of what can happen to a business that isn’t prepared. Future pandemics are almost inevitable. As a result, people will now take much more seriously the threat of unpredictable changes that affect their industry. In particular, many businesses are likely now to avoid lean inventory and to instead consider keeping more safety stock in order to prepare for these kinds of events. Of course, there are certain types of inventory where this is more likely and more practical. It’s also likely that more companies are going to be interested in sharing their warehouses with other businesses, in order to reduce overheads and risk. New processes are being introduced to ensure adaptability and resiliency going forward. These include smaller warehouses located closer to the end-user, which can help to reduce delivery times and logistical costs.
While many will see these changes as the inevitable impact of Coronavirus, the truth is that many of them were already on the way. The eCommerce market has been growing significantly over the last decade. Moreover, this has been echoed by changes in the amount of warehouse space needed, as well as the locations of that space. Meanwhile, 3D printing and POD industries have increasingly led to an increase in the amount of machine-led processes. All these changes were already happening, as was the shift toward remote working and collaboration.
However, COVID-19 has forced many of these changes to move at an accelerated rate. Subsequently, that has resulted in a sudden and new demand being placed on the industrial real estate market. This is something that we can’t “come back from.” The genie is out of the figurative bottle. While all heads are turned to wireless infrastructure, teleconferencing, and other online technologies, it is ultimately the real estate industry and logistics that are going to form the backbone of this new future.
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