The transition to an integrated digital economy – and boosting e-commerce activity –  has accelerated in 2020. The growth in e-commerce was already expanding rapidly. The U.S. Census Bureau estimates $596 billion of e-commerce retail sales occurred in 2019, growing 14.9% from 2018.

According to CBRE Research and others, e-commerce penetration as a percentage of total retail sales is expected to climb from 16% today to more than 25% by 2025.

E-commerce is also now penetrating certain categories of retail that have been proportionally underrepresented in online sales (e.g. grocery). Despite the adoption of new in-person retail offerings like no-contact curbside pickup or prepared family-style meals, the e-commerce transition will continue having new and lasting impacts on the way retailers operate.

According to CBRE Research, each $1.0 billion in additional e-commerce sales creates 1.25 million sq. ft. of additional warehouse demand nationally. Chicago has become a super-regional logistics hub and is one of the largest U.S. warehouse markets with 776 million sq. ft. of inventory. 

As warehouse demand rises across the country, Chicago is set to benefit as a key link in the supply chain between west coast ports and many central and east coast destinations. CBRE’s Econometric Advisors project developers will need to add between 200 and 220 million sq. ft. to Chicago’s total industrial footprint by year-end 2025, bringing the market to a massive 1.5 billion sq. ft. As online retailers continue to dominate the leasing numbers, we expect much of that to come in the form of warehouse space in order to support the growth in e-commerce.

Figure 1: Non-Store Retail Continues Capturing Greater Share of Total Retail Spending

Source: U.S. Census Bureau, August 2020.

 

Figure 2: Projections Suggest 200-220 Million sq. ft. of Industrial Inventory Added by Year-End 2025

Source: CBRE Econometric Advisors, Q2 2020.

 

Figure 3: Developers Playing Catch-up After Last Downturn

Source: CBRE Econometric Advisors, Q2 2020.