Around two decades ago, the industry of e-commerce was launched, but at the time it was not taken seriously and nobody thought that it would eventually amount to anything. However, it grew at a breakneck pace as internet penetration grew and now, it is one of the world’s biggest industries. The hyper-growth has also meant that e-commerce companies now need bigger warehouses meant for the storage and packaging of the millions of products they sell. Hence, it is not a surprise that the market for industrial real estate is now being propped up to a disproportionate degree by the e-commerce industry and it is expected to continue for the foreseeable future.
However, questions remain whether this can be a sustainable model for the industrial real estate industry. One of the best illustrations of this particular phenomenon can be found in the city of Houston in the state of Texas. Developers in the city have been building industrial real estate at a breakneck pace over the past few years. The boom in the real estate sector in addition to the rise in population has resulted in higher demand for industrial real estate space and the industrial space market has continued to expand. According to the report, the market in Houston alone has risen to 430 million square feet from 317 million square feet throughout the past half a decade. It reflects a rise of 13% during the period.
However, as the gross deliveries with regards to industrial space have increased, the vacancy rate has also risen and currently, it stands above the national average of 5%. The vice president of the Liberty Property Trust, a leader in the market in Houston expressed his concerns with regards to the vacancy rates as well. He said,
“Any time you see a new record in deliveries, you watch it closely with a healthy level of concern.”
Experts believe that there could be a case of building new industrial real estate with the thought that as long as they keep building new spaces, companies will lap them up. However, it remains to be seen how long that enthusiasm continues.
