Retailers are going to begobbling up real estate space to expand warehouse and logisticsoperations in response to booming online sales amid the pandemic,according to a new report by Prologis.

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The REIT's research departmentfound in a June study that e-commerce penetration in the US spiked tomore than 25% in April, up from 15% at year-end2019. 

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Before the pandemic, Prologis hadforecast e-commerce penetration to be about 17% this year. The firmhas since revised the estimate up to 20%.

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Online retail was growing rapidlyeven before the coronavirus outbreak, as was e-commerce logisticsoperations. Prologis' study of 30 top US retailers showed a9% expansion of logistics operations footprintslast year, compared with annual growth of 6-7% during the previousfive years. 

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E-commerce companies require, onaverage, triple the amount of logistics property space asbrick-and-mortar retailers, according to Prologis. That's largelybecause e-commerce inventory is stored in a warehouse, whilebrick-and-mortar retailers can keep a portion of inventory on storeshelves. 

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Observers had expected that theintensity-of-use ratio between online and brick-and-mortarcompanies would decline as e-commerce operations became moreproductive. But the ratio has remained between 3 and 3.5 for thepast five years, according to Prologis. 

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"The stability of this ratiosuggests that supply chains were not yet optimized for the futurebalance between online/in-store sales channels prior to thepandemic," the report states. "Then, e-commerce penetration ratesincreased faster in the first four months of 2020 than in the priordecade, fueled by the stay-at-home economy." 

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The study also shows thatretailers are driving about 40% of the overall demand for logisticsreal estate. Within that industry, brick-and-mortar companiesaccount for 60-70% of the demand while e-commerce firms arespurring 30-40% of the demand.

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Prologis expects that the "pushfor resilient supply chains will likely lift the intensity of usefor both e-commerce and brick-and-mortar customers, whilepersistently higher e-commerce space needs support our expectationsfor demand tailwinds." 

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In an earlier report, Prologis noted that consumer demand forcertain products during the pandemic caught some retailersoff-guard as they'd scaled down their inventory to have moreefficient supply chains. Now, those same retailers will likely seekto increase inventory and warehouse space. 

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Looking ahead, Prologis predictsinventory growth of 5-10%, which equates to additional logisticsspace needs of 285,000 to 570,000 square feet inthe US.

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"We expect this shift to lead tobroad-based logistics real estate demand growth, with an emphasison large consumer populations, access to transportation and modernfacilities," the firm stated.

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Phillip Bantz

Phillip Bantz is a reporter for Corporate Counsel. Follow him on Twitter @PhillipBantz.