Once there are widespread vaccinations and people begin shopping in physical retail locations, will that make a dent in e-commerce sales and warehouse demand?
One analyst group says no.
While BTIG sees more in-person shopping on the horizon, it does not expect a material shift in e-commerce demand. In fact, it sees more need for modern warehouse facilities in 2021.
BTIG predicts the drivers of this warehouse demand will be retailers rushing to restock inventory, household formation increasing and Coastal-to-Sunbelt relocations bringing swift online fulfillment expectations to new markets.
As people migrate to the Sunbelt, demand will shift. BTIG says population growth and household formation in Tier II industrial markets materially outpaced Tier I markets in 2020. It expects this trend to accelerate in 2021. Of the 29 Tier I and II markets BTIG tracks, 16 experienced above-average growth. Thirteen of those 16 were in the Sunbelt States. Seattle, Denver and Indianapolis were the three exceptions.
This is not to discount the influence online shopping has on the industrial market and will continue to have even as physical retail stores return to pre-pandemic operations. In a recent survey, BTIG found that 75% of respondents indicated they would shop online as much or more next year, even after a vaccine is available.
As this happens, retailers have to restock their inventory. BTIG says the pandemic-driven shift to online retail effectively “broke the supply chain.” BTIG cites the ISM Service PMI report where respondents noted that inventory levels were too low only three times in the last 23 years: March, November and December 2020.
While BTIG is bullish about e-commerce growth this year, not everyone believes it will continue to flourish at these strong rates after the pandemic.
“We saw the growth in e-commerce go through the roof with the pandemic started,” Jonathan Needell, the president and chief investment officer at KIMC, told GlobeSt.com in an earlier interview. “I think that we can expect the growth rate to decline fairly dramatically just because the denominator is so much greater and there will be pent-up demand. That could mean that the growth declines, flattens or it goes to a lower growth rate. It is hard to say—and it could re-accelerate.”