Aerotropolis Article: Growth of E-Commerce Sparks Industrial Development in the Aerotropolis Region

The retail industry has undergone significant changes in the past decade, largely due to the increase in online shopping. It is estimated that 80 percent of U.S. consumers now shop online, compared to only 22 percent back in 2000. The growth of e-commerce has led to an increase in demand for light industrial and warehouse properties.

The Transportation, Distribution and Logistics (TDL) Industry

“We’re seeing a shift in the demand for light-industrial properties,” explains David Egan, global head of industrial & logistics research at the CBRE Group, the world’s largest commercial real estate services and investment firm. “Although they were initially out of favor in the early part of the current real estate cycle, light-industrial properties have seen a rapid decline in availability and a rise in asking rents relative to the overall market.”

As inventory decreases and rents increase, building new becomes a more attractive option – sometimes the only option. With over 6,000 acres of available land for development, the Detroit Aerotropolis region is well-positioned to capitalize on this trend. TDL companies also need to be close to major highways, railways and airports in order to move goods seamlessly from one place to another. With access to five rail lines, three major highways and two airports, the Aerotropolis region is an optimal location for e-commerce companies.

eCommerce Project : Amazon’s Distribution Center

One recent e-commerce project in the Aerotropolis came at the hands of Amazon, who just completed construction of a new 850,000 sq. ft. distribution and fulfillment center in the city of Romulus. Their $140 million investment will use state-of-the-art technology and robotics equipment to pack and distribute small items such as books, electronics and other consumer goods. Amazon is currently hiring to fill about 1,500 jobs in the facility.

Experts are projecting significant growth in the e-commerce industry, further fueling demand for industrial properties in the region. “E-commerce sales totaled $453.5 billion in 2017 and have been growing at an average of 15 percent annually since 2010,” says Egan. “E-commerce’s share of total retail sales is expected to rise from 8.9 percent in 2017 to just over 15 percent in 2022, totaling nearly $892 billion.”

How much will TDL Grow?

According to the CBRE’s estimates, it takes approximately 1.25 million square feet of logistics space to support every $1 billion in ecommerce sales. That means demand for warehouse and distribution space to support ecommerce could reach over 1.1 billion square feet nationwide by the year 2022. If it were all new construction, well over 100,000 acres of vacant land would be needed to accommodate such growth.

“Between the availability of land and the regional transportation assets, the Aerotropolis is well positioned to attract companies that are part of one of the fastest growing industries in the world,” explains Rob Luce, executive director of the Detroit Region Aerotropolis Development Corporation. “Furthermore, as a Next Michigan Development Corporation, we have the ability to incentivize ecommerce projects and others in the region.”

There are many factors impacting the e-commerce revolution, including but not limited to consumer preferences, technology advancements, and the ability of retailers to keep up with the ever-increasing pressures of timely fulfillment. While these factors are hard to predict, it is safe to say that e-commerce will continue to expand in the foreseeable future. Some experts are predicting that e-commerce will peak at around 25 percent of total retail sales, while others believe it could go even higher.

“Whatever the growth prospects, focusing on ecommerce is part of a broader strategy to diversify Michigan’s economy,” says Luce. “We are excited by the opportunity and ready to do whatever it takes to attract and help facilitate these projects into the Aerotropolis.”