- REUTERS/Fred Greaves
- The shift towards buying online has created a need for more warehouses in the US.
- But, growing demand has increased the cost of the industrial land plots where these warehouses are being built.
- Those costs could potentially be passed down to the consumer in the future.
The rise of online shopping is driving up land prices in some parts of the US.
According to the real-estate company CBRE, there has been a surge in the price of industrial land in the US, thanks in part to e-commerce companies’ demand for warehouses and distribution centers.
CBRE found that the average price for large plots of land – between 50 to 100 acres – doubled by 50% in the last year, to more than $100,000 per acre.
According to CBRE, smaller industrial plots, which are often closer to urban centers and handle same-day shipping, have also seen a cost increase in the last year – from $200,000 per acre to $250,000.
CBRE’s Global Head of Industrial & Logistics Research, David Egan, said that the rapidly increasing price of land is one reason why companies haven’t been able to create as many warehouses and distribution centers as are necessary to keep up with demand.
“This situation won’t go away any time soon, because the markets where distribution centers are most in demand – typically near or in densely populated city centers – have scant available land for industrial uses,” Egan said in a statement to the press.
Prices have surged in some of the US’ main industrial areas, including Southern California’s Inland Empire, New Jersey, Las Vegas, Chicago, Atlanta, and Houston.
These price increases could eventually trickle down to the consumer as e-commerce companies look to cover their shipping costs. Amazon currently absorbs some of its shipping costs to lure in customers with cheaper prices. In 2016, it spent $7.2 billion on shipping costs outside of the revenue generated from Amazon Prime membership fees.