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


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.

What Are the Risks?

All investments involve risks, including possible loss of principal. The risks associated with a real estate strategy include, but are not limited to various risks inherent in the ownership of real estate property, such as fluctuations in lease occupancy rates and operating expenses, variations in rental schedules, which in turn may be adversely affected by general and local economic conditions, the supply and demand for real estate properties, zoning laws, rent control laws, real property taxes, the availability and costs of financing, environmental laws, and uninsured losses (generally from catastrophic events such as earthquakes, floods and wars). Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments; investments in emerging markets involve heightened risks related to the same factors. To the extent a strategy focuses on particular countries, regions, industries, sectors or types of investment from time to time, it may be subject to greater risks of adverse developments in such areas of focus than a strategy that invests in a wider variety of countries, regions, industries, sectors or investments.