Watch: Here are the key drivers of the industrial real estate boom

New episode of "Paydirt" breaks down the shifts in shopping patterns that transformed the supply chain, pricing and demand in the sector, and the fortunes of its biggest players

We’ve become a nation of one-click wonders. And that has led to a historic boom in what was once considered the sleepiest asset class: Industrial real estate. In this episode of “Paydirt,” The Real Deal’s Hiten Samtani breaks down the shifts in shopping patterns that led to a transformation of the supply chain, explores pricing and demand in the sector, and takes a look at what the biggest players in the space are doing.

It all stems from a sea change in the way Americans shop. E-commerce penetration has gone from 4 percent in 2010 to about 13 percent at the end of last year, with the pandemic supercharging that growth.

The old supply chain worked like this: Have as few stops as possible between manufacturer and consumer to keep costs low.

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This shift toward an omnichannel retail strategy — major brands combining online and brick-and-mortar sales — has upended supply chains. And given the greater number of nodes required — and the tendency of consumers shopping online to send a lot of stuff back — e-commerce sales can require three times as much industrial warehouse space as traditional brick and mortar sales, according to Prologis, necessitating more “reverse logistics.”

So how is that playing out on the ground? In a word, it’s a frenzy. All space suitable for industrial use is being snapped up at sky-high prices and much of the available space in urban cores is being redeveloped for last-mile centers. Investment giant Blackstone has been on a tear, amassing a portfolio that now rivals that of Prologis at 800 million square feet. In December, it bought a 17.4 million square foot package of industrial properties for $2.8 billion.

Watch the video above for a quick breakdown of the key drivers of the industrial real estate boom. For more explainer videos, check out the rest of the Paydirt series.