How E-Commerce is expanding Secondary Real Estate Markets
The boom in e-commerce in the past few years has made a lot of things possible. People are able to order things directly to their doorstep or to their business and often, they expect those things to get to them quickly. E-commerce is also leading to a quickening in another sector of the economy. Secondary real estate markets are seeing a major boom right now, in part because of the demand that e-commerce has brought to the industry.
Primary real estate markets have been majorly impacted by the supply chain boom led by e-commerce. This means that warehouses are developing in many places across the country. As primary markets expand, the principles that make them such a great option are also seeping into the secondary and tertiary markets.
Online ordering of supplies and inventory has expanded primary markets exponentially and has led to low vacancy rates in primary markets nationwide. As online ordering becomes the way of the world, secondary markets receive parts of the business as the demand seeps into smaller markets. This enables demands to be met across the country rather than just in the bigger cities where the demand is the highest. Secondary and tertiary markets have seen the most growth in the past years. From 2014 to 2017, tertiary markets had the greatest growth, expanding 36.2% as percent of total volume. As for secondary markets, they accounted for 43% of sales in 2017, according to data from JLL Industrial Brokerage.
The movement from primary to secondary and tertiary markets that is driven by e-commerce will not be slowing down significantly anytime soon. The increased demand for one or two-day delivery has made last-mile delivery centers a crucial aspect in distribution. These centers are increasing as the ways that businesses make transactions seem to cement their dedication to online fulfillment services.
Although growth in secondary markets has been steady, it did drop a bit in 2019. According to the National Real Estate Investor, “total sales volume in secondary markets was close to $3.9 billion as of March 2019, a slight drop from $4.1 billion in March 2018.” This does not have any drastic implications for the market, as growth has slowed in all industrial markets in the past few years. According to CoStar data, the net absorption in secondary industrial markets is at the highest level since 2019 and have “the most new completions and industrial projects under construction as a percentage of existing stock.”
Secondary markets may have slowed down, but forecasters believe that they will still be a very strong part of the market for years to come. The reason for this, according to CoStar, is that there is “Available stock to some degree…there are still rents under control, and e-commerce users bringing access to customers in those markets.” E-commerce isn’t going anywhere; it is only set to expand. As the growth in e-commerce continues, secondary markets will continue to be important for businesses to handle orders, deal with supplies and fulfill deliveries in smaller cities and towns.