I have watched our industry go through ebbs and flows in response to some of the most interesting consumer trends anyone has ever seen. The digital era is now, and that means having the convenience of living life without leaving the couch.
By now everyone has seen Black Friday images of hysterical shoppers, midnight quarrels, department store bargains and 72-inch TVs that don’t fit in the shopping carts. And about 10 years ago more people got involved in Cyber Monday, the digital experience of Black Friday--only in your pajamas, with your computer, without fist fights. According to Practical Ecommerce, in 2017 approximately 58 million people chose to do their Thanksgiving weekend shopping online only, versus roughly 51 million at physical stores only.1
Ecommerce is no longer a trend, it is a way of life. Some retailers might not even have a physical presence and don’t see a need to make one. Others are creating beyond-retail shopping experiences by including amenities such as free Wi-Fi, complimentary wheelchairs and picnic tables. They are hoping that by providing a unique gathering space—such as a demographically-customized shopping center with a gym, theater and restaurants—they can continue to compete in the retail space. Grocers and pharmacies continue to adapt with models like mobile ordering and door-to-door delivery, or drive-through order pick-ups to skip the lines and delivery fees.
Consumers are buying rapidly online and some retailers are struggling to keep up with the demand. Joe Farkas, CEO and Founder of Metropolitan Realty Associates LLC, recently spoke at an investors panel in New York, saying “when you watch as the consumers continue to spend and buy on the internet, they want same-day [delivery] and then it’s six hours [delivery]… it’s all shifting.” Most online products are stored in warehouses, and the facilities need to be near major metro areas to accommodate consumer expectations of instant gratification. Ecommerce companies like Amazon now offer customers two-hour delivery service options, and goPuff has an on-demand mobile app that allows you to order necessities from a warehouse.
“There’s a big demand for industrial product to satisfy this growing consumer appetite and we were fortunate,” Joe says. “We got in early on this trend and we bought two great industrial buildings—where our basis is $200 a foot. The investor hype is running up pricing and everybody wants to buy industrial buildings.”
We have even seen large department stores with prime locations close and convert into a warehouse and distribution center to support online sales. Shipping the products bought online can create logistical issues for apartment complexes and multifamily properties. Some tenants pay a premium for a 24/7 onsite mail service to store their packages safely. We have seen our property managers set aside specific locations in their buildings for tenants to access larger delivery boxes—that type of accommodation delights the tenant. Office buildings have leased space to the recently implemented Amazon Lockers, which consumers can select as their delivery location instead of their home.
The ecommerce customer journey is an effortless, repeating cycle, and the commercial real estate industry will need to continue to adapt to this and other advances in digital technology. Commercial Banking’s commitment to innovation and customer experience, combined with our certainty of execution, delivers value for commercial real estate investors as they develop and execute their portfolio strategy.
1 Sales Report: 2017 Thanksgiving Day, Black Friday, Cyber Monday, Practical Ecommerce, November 30, 2017
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