The pandemic has had a significant impact on Commercial Real Estate. According to Deloitte market research, more than 27% of US businesses saw a significant decline in their revenues in the first few months of the pandemic itself.
As many as 78% of small businesses said they could not keep up with their overhead costs of paying rent and paying employees even when there was hardly any business coming in. This was one of the biggest hits the industry has taken after the 2008 global recession.
But everything was not so gloomy for CRE businesses that owned warehouses and commercial storage spaces. Though hotel and restaurant-based real estate suffered a lot, warehouses kept booming with business throughout the pandemic and kept many real estate businesses afloat. Some of this rise in demand is here to stay due to the permanent changes the pandemic has had on people.
As a real estate owner or property manager, if you are looking to diversify your portfolio into warehouses, keep reading.
Short-term effects of the pandemic on warehouses
In the initial days of Feb - Marc 2020, businesses and daily activities came to a halt due to the pandemic and restrictions that came with it. Most economic activities took a bad hit, including regular sales, and warehouse demands also saw a fall like all other Commercial Real Estate (CRE) properties. Other than home essentials, there was hardly any demand for things, hence the drop in demand for storage. Due to the sudden halt in business, it was hard for retail shops to get inventory out of warehouses, which saw a dip in warehouse demand in the initial months.
But things changed pretty quickly after the initial few months. Here’s how.
Long-term effects of the pandemic on warehouses
The demand for warehouses and storage facilities bounced back to its pre-pandemic demand, and soon companies started looking for different warehouses. This sudden rise in demand had many factors at play and left many long-term effects on the CRE business and how companies and their leadership and strategy committees are shifting their priorities.
Rise in demand due to rising e-commerce sales
UNCTDA market research said that the global e-commerce business rose to a whopping $26.7 trillion by 2021; not only did it help businesses get back on their feet, but it also worked wonders for CRE businesses that own warehouses. Bloomberg news report says that in the US alone, e-commerce sales rose by 15.7% by mid-2020, and it kept increasing in the next two years to come. E-commerce is all about the warehouse, storage, and deliveries; there are no retail shops to look at. This sudden increase in e-commerce increased the demand for warehouses, and companies even paid extra to get their hands on new warehouses.
The Daily Targum reports say that this rise in e-commerce during the pandemic is here to stay long after the effects of COVID subside. Many real estate businesses took a closer look at their business process overview and were quick to adapt to these rising trends.
Offering inventory management is crucial
Many businesses across domains started their e-commerce businesses after the pandemic hit, even offline businesses went online, and they hardly had any idea about inventory management. So real estate project management in warehouses needs inventory management. Many property managers and business owners are offering their own inventory management systems with the right technology selection to drive up their warehouse sales and get new customers. Real estate businesses are using everything to offer inventory management, from AI-powered tools to the latest software to streamline the process and regulate inventory.
Warehouse logistics automation
The sudden rise in e-commerce and warehouses did not anticipate the need for extra labor to handle this added pressure in business. This led to the need for automation of multiple business processes like invoicing, tracking, packaging, pickups, team coordination, accounting, inventory management, order management, and more. Even stakeholder and customer interaction can be automated with RPA bots, and real estate owners have adapted to it.
Case studies on increase in warehouse demand
Due to the sudden increase in demand for e-commerce, businesses have invested and improvised in adapting to it and getting on top of it. Here are some real-life examples of how the most prominent businesses influenced the sale of warehouses to inspire your expansion into this sector of business.
ShipBob
ShipBob is an online e-commerce fulfillment solutions brand that offered its employee an option of complete remote work; this left them with a lot of free office space; in the beginning, they suffered some losses due to the sudden shift. But they changed their business process pretty soon; they started reducing their office space and rented it out to other companies, and increased their warehouses. CNBC reports say that ShipBob expanded its warehouses to 24 locations by 2020 and planned to make it to 37 by the end of 2021. This immediate change helped them soar in their business and did not let their financials suffer.
Walmart and Amazon
Bloomberg news report data says Walmart, which was famous for its retail outlets, also increased its number of warehouses from 4 before the pandemic to 11 during the pandemic. Amazon took to this trend of rising sales and jumped its number of warehouses from only 4 to 27 across the USA alone.
Diversifying your property management plans with Assetsoft
All businesses are adjusting to the new normal, but CRE had one bright side to their business even through the aftereffects of the pandemic. But diversifying your business is just the start of it; you also need to diversify your technology selection in project management to handle this new business and properties. At Assetsoft, we can provide you with an assistive technology implementation plan to pave the way forward. Our real estate tech experts are always updated about these market trends and new software, and we can guide you.
Talk to us to know more about our work and how we plan to assist in your growth and property management plans.