“Let our advance worrying become advance thinking and planning.”

-Winston Churchill

The rise of e-commerce should not give those in the commercial real estate sector any cause for worry. It should, however, give them plenty of cause for planning. The progress of online sales is real and it is rapid, but with a bit of help from data and common sense, it is clear that future strategies are beginning to take shape. After all, a cosmic shift in the business we do will only naturally affect the way we do business.

The Rise of E-Commerce

After averaging annual gains of around 10 percent during the previous decade, e-commerce soared out of the gates once the ‘Great Recession’ came to a close. In 2010, as overall retail sales grew by 5.6 percent, online sales saw an increase of 15.3 percent.

Last year, online sales experienced more rapid upward movement, increasing by 16.3 percent while overall retail saw a 5.1 percent increase. Even with these figures calculated in, e-commerce only accounts for roughly 6 percent of all retail sales. However, a study performed by Deloitte predicts that number reaching 30 percent by 2030.

The commercial real estate sector is still seeing sustainable growth despite these facts, with new retail units expecting to increase by 9 percent this year. This number, however, is bolstered by the restaurant sector, which will account for 43 percent of the planned growth. Some areas such as apparel, bookstores and other mid-priced hard goods are seeing large declines in their planned units due to competition with e-commerce.

The Future of Commercial Real Estate

The first thing that commercial real estate professionals should do is make sure to understand that the sky is not falling. The brick and mortar shopping experience is not at any risk of extinction and the e-commerce share of retail sales is not expected to go much further past 30 percent. Understanding this, the e-commerce shift in retail should be seen as an opportunity.

Industrial investors should prepare to handle a tidal wave of demand for distribution centers. The size of bulk warehouses are ever-increasing due to retailers like Amazon, which are in need of many distribution centers due to their exclusively online presence. These bulk warehouses will likely provide a boost by way of new industrial demand.

On the retail front, focus will shift away from mid-priced hard goods and towards sectors that do not need to compete with e-commerce. This means that restaurants, grocers, and service-based retailers will drive the future of commercial real estate. Instead of counting on large flagship apparel stores, successful shopping centers will be anchored by entertainment and dining establishments.

The future of the industry is still as bright as ever, but there is plenty of work to be done. Those who fail to plan are indeed planning to fail, but there is certainly a great amount to be gained from engaging in sound strategic thinking. In the end, those who display the dedication to adjusting with the times may have their best days ahead of them.

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