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Internet and E-commerce driving bricks-and-mortar development?

The United States has a consumer-dominated economy. Consumer spending makes up a significant portion of all spending. When consumer spending has been strong, it has led to strong growth and development of much commercial and industrial real estate in Minnesota and across the country.

Neighborhood shopping centers, strip malls, large suburban malls and big box retail development and much of supply and logistics infrastructure were all produced as a means of providing consumers with easy access to the goods they wanted to purchase.

After the economic downturn last decade, some of that space was idled, as consumer spending contracted and business closed stores or went out of business. Some feared that there would never be a recovery and that as the presence of the internet and e-commerce become more noticeable, bricks-and-mortar development was doomed.

But an unexpected development has been the inexorable growth of the ever-shorter delivery windows from companies such as Amazon. With their "Prime" customers receiving their products within 48 hours, the company has been forced to build a growing number of distribution centers near major metropolitan areas, including Minneapolis.

They have also introduced an accelerated version of Prime that provides free 2-hour delivery for some products in limited geographical areas. The complexity of this type of system is it requires that they have distribution facilities within close proximity to their potential customers.

As a result, there has been a decline in vacancy rates in 38 of 51 commercial and industrial markets surveyed. With the rapidity of delivery becoming a market differentiator, it may place more pressure on other physical retailers and lead to further changes in the retail, commercial and industrial real estate markets.

Source:, " Young report," Dan Rafter, May 12, 2016

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