Leading global logistics real estate provider Prologis Inc. (NYSE:PLD) believes the pandemic has "accelerated the retail evolution" and is "pulling forward several years of adoption."

Ecommerce requires more space

Findings from the report showed ecommerce penetration in the U.S. has spiked during the pandemic, reaching a level of more than 25% in April compared to just 15% at the end of 2019. The company is forecasting this metric to equal approximately 20% for the entirety of 2020 compared to the 16.9% forecast issued prior to the pandemic.

As both brick-and-mortar and ecommerce fulfillment supply chains seek improved resiliency and attempt to minimize the potential for future shocks to supply like those seen in March, the intensity-of-use ratio will likely move higher in both types of supply chains.

Retail bankruptcies not likely to impact demand

The recent report showed the potential offset to new logistics warehouse demand from retailer insolvencies may be minimal. Of the retailers that have filed for bankruptcy in 2020, their logistics real estate footprint represents less than 20 basis points of total U.S. logistics real estate occupancy.

Prologis said its portfolio of properties capture roughly twice the household income within 10 miles of the facility location compared to facilities operated by retailers that have recently filed for bankruptcy. Many of those companies operate large facilities in less populated areas, bucking the trend of turning products faster in smaller facilities located in consumption centers.

Industrial activity rebounds in May

Prologis' activity index, the Industrial Business Indicator, bounced off of historic April lows to a reading of 45.1 in May, a level the report referred to as "consistent with a shallow recession." A reading under 50 implies contraction in warehouse activity.

Prologis views the sharp bounce in the index as indicative that a demand slowdown for logistics space will be "short-lived." The company said that its lease proposals increased 5.4% year-over-year in April and May.

Chart: Prologis Research

Logistics space utilization increased 90 basis points sequentially in May, but still remains approximately 150 basis points below pre-COVID-19 levels. Higher activity from some customers and swollen inventories for retailers with closed stores was credited with driving this metric higher.

San Francisco-based Prologis owns nearly one billion square feet in industrial real estate across 19 countries, serving 5,500 customers in B2B and retail anTd online fulfillment. Many of its warehouses in the U.S. service ports on both coasts, regional distribution hubs and rail and intermodal facilities.

Click for more FreightWaves articles by Todd Maiden.

Photo: Prologis Inc.