E-Commerce Growth May Drive Logistics Space Demand To 30% By 2030

If the rapid expansion of e-commerce continues beyond 2024, logistics space demand could rise from its current 24% to 30% by 2030, with cross-border retailers like Shein and Temu playing a key role.

A recent analysis by Prologis highlights the effect of the e-commerce boom on logistics real estate, revealing that by 2024, online retail will contribute to 56% of total goods sales growth in the U.S. This translates to an annual growth rate of 8%, compared to just 1.8% for in-store sales.

To keep up with this trend, retailers have been revising their real estate strategies, focusing on enhancing their warehousing and distribution networks. In fact, occupied U.S. logistics space has surged by 12%, while occupied retail space (excluding services) has dropped by 2.4%.

According to the report, “E-commerce still requires three times the logistics space of in-store sales in 2024.”

This shift could lead to a demand for an additional 250 to 350 million square feet of logistics space in the U.S. over the next five years.

The analysis also underscores the growing role of cross-border e-commerce, particularly in Asia. The combined revenues of Shein and Temu from U.S. online sales are expected to rise from $6 billion in 2022 to $44 billion by 2024—more than a seven-fold increase. To support this growth, both retailers have adjusted their business models to include more U.S.-based third-party sellers, expanding their logistics footprints to sustain the surge.

In 2024, Asian third-party logistics providers, primarily from China, are expected to account for nearly 20% of new industrial leasing in the U.S., with a significant presence in Southern California and the Northeast. Early data suggests this trend could continue into 2025.

The boom in e-commerce has also led to a rise in the closure of physical stores. As inventory and operations shift to logistics facilities, trends such as showrooming, smaller-format stores, and limited in-store stock are reducing on-site availability, increasing the need for quick replenishment from nearby warehouses, according to Prologis.

Recent leasing activity in key logistics hubs, such as Southern California, Greater New York City, and Chicago, highlights the advantages of scale and the opportunity to improve upstream operations.

Consumer expectations are another driving factor. With more shoppers demanding free returns and fast deliveries, retailers are adjusting their warehouse locations and fulfillment strategies to be closer to urban centers and offer faster delivery times.

Prologis concludes that as e-commerce penetration grows, demand for industrial space will rise. For every 1% increase in e-commerce share in the U.S., 50 to 70 million square feet of industrial space are absorbed.

Source: GlobeSt.