E-commerce has driven unprecedented performance for the industrial sector over the past 10 years, characterized by robust demand, falling availability and above-average rent growth.

CBRE Econometric Advisors (CBRE EA) expects e-commerce to grow nearly 6% per year on average (adjusted for inflation) over the next decade, sustaining the tailwind for industrial assets. However, the e-commerce effect varies by location, as CBRE EA’s market-level analysis demonstrates.

In Figure 1, we show the impact of 1% per year faster e-commerce growth on the expected five-year rent growth. Many e-commerce-sensitive markets are large population centers or are located adjacent major distribution hubs, such as Allentown, PA and Central New Jersey. A market like Las Vegas is an outlier. Theoretically, a more tepid e-commerce boost to growth at sizable Midwestern markets, such as Columbus and Indianapolis, could be explained by their proximity to fewer end-consumers. Fewer barriers to new development in these markets (more available land, lighter regulations, etc.) may also play a role.

FIGURE 1: Difference Between E-commerce Boosted Rent Growth and Baseline