Where Bricks Are Beating Clicks—Implications For Last-Mile Real Estate

How e-commerce disruption helps real estate? Alternative Views explores the global demand shift from physical retail space to industrial logistics space.

Franklin Real Asset Advisors

PREVIEW

The explosive growth of e-commerce disruptors like Alibaba, MercadoLibre and Amazon has sent shockwaves across retail markets worldwide, and of course, retail sector stocks. The effects of these shockwaves have extended to alternative investments as well. In commercial real estate, for example, the e-commerce paradigm has created a new demand for logistics infrastructure.

Many observe the impacts of e-commerce growth as decimating commercial retail properties, leaving empty big-box warehouses and strip malls in its wake. While this may be true to a certain extent, it ignores the tremendous opportunity this new trend is creating in the industrial property sector. It seems that for every mall that closes, a distribution warehouse—or so called last-mile logistics space—opens.

Key takeaways

  • As e-commerce continues to penetrate global markets, we believe the shift from physical retail real estate to industrial logistics space will persist as well. We view this as an attractive investment opportunity.
  • Some analysis suggests that e-commerce retailers require three times the logistics space of a traditional retail business.
  • Investments in last-mile delivery facilities like urban logistics spaces and parcel hubs can serve as a proxy for investors seeking to capture additional exposure to e-commerce growth, outside of equities.