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The pandemic accelerated the adoption of e-commerce by several years. Customers will need to invest in supply chain capabilities that address same- and next-day service requirements well beyond 2021. The share shift from brick-and-mortar to online has and will continue to create an incremental 140 million to 185 million square feet (MSF) of demand for logistics real estate, with an emphasis on high-quality locations near end consumers.
The pandemic has also laid bare the trade-offs supply chains have made in tuning for efficiency, in turn highlighting the need for more resilience in supply chains, thereby increasing inventory levels. Prologis research estimates that this could increase inventories by 5 to 10 percent or more, generating 285 to 570 MSF of additional demand over the next two to three years.
Trade tensions and pandemic-related supply chain disruptions have spurred the need for diversified production and sourcing operations, causing some companies to explore nearshoring. If implemented, these changes are costly and complex, and thus are likely to be a longer-term trend.
Logistics users invest in automation primarily to improve labor productivity and throughput. Automation adoption is fairly low, at about 20 percent of logistics facilities today, and more companies are turning to flexible modular and mobile automation technologies to address these requirements. These tools can boost return on investment, especially in high-cost labor areas near end consumers, the ideal locations for fast e-commerce delivery times and where logistics real estate is in short supply.