The Real Deal Chicago

With industrial space scarce, retailers turn to on-demand warehouses

Short-term industrial leases provide retailers with flexibility to help fulfill holiday gift-buying, a new report says
December 29, 2018 04:00PM

(Credit: iStock)

With warehouse space at a premium, some retailers are now looking to short-term “on-demand warehousing” to help them find much-needed industrial real estate.

The rise in e-commerce has caused a dramatic surge in the demand for industrial real estate. But even as developers have flooded the market with new inventory, some retailers are still having trouble finding adequate, flexible space.

Now, companies like Flexe and Stord are stepping in to help retailers find industrial space to rent in the short-term, according to the Wall Street Journal. Short-term industrial leaseing, also known as on-demand warehousing, is especially helpful to retailers around the holidays, when e-commerce activity surges.

On-demand warehousing firms are popular with small retailers and online startups that don’t have existing distribution networks. But the services are now being used by companies like Walmart, which used Seattle-based Flexe to find 1.5 million square feet of warehouse space to help fulfill online orders around the holidays, according to the Journal. Ace Hardware also used Flexe to help it quickly restock stores damaged by hurricanes Harvey and Irma.

Short-term industrial leases allow retailers to remain flexible as they seek to cater to the changing demands of consumers.

Thanks to e-commerce and a strong economy, demand for warehouse space hit an 18-year-high in 2018, and Chicago has one of the hottest markets in the country. The local industrial market posted a second-quarter vacancy rate that is a 17-year low, and the trend does not appear to be waning.

Investors have remained bullish on the booming industrial sector, even as tariffs and rising interest rates have threatened to slow the market. [WSJ] — Joe Ward