For centuries, land-usage has revealed trends in American lifestyles. The first settlers used land for defensive garrisons and for subsistence farms. As the US became more developed, merchants used land to produce goods that were traded overseas. Now, we see E-commerce companies like Amazon (AMZN  ) using land to store merchandise that will be shipped later on.

These companies can explain why warehouse demand is rapidly rising.

Typically, warehouses are rented, not bought. Thats where the Real Estate Investment Trusts (REITs) come in. They lease the warehouses to companies. In the past, physical stores used to fuel warehouse demand. Even though E-commerce companies account for only 20% of warehouse demand, they are responsible for the current surge in prices. In fact, rental rates for top warehouses were up 9.9% from 2015 primarily because of E-Commerce..

Why the sudden boom? First, E-commerce is on the rise almost everywhere. In the United States, it is already a $220 billion industry and grows at 17% annually. In Europe, most countries also have growth rates that 10% annually. In Asia, fresh markets have yet to be fully permeated. To accommodate this demand, companies have to increase storage.

Also, with the proliferation of two-day shipping across online platforms, customers expect fast shipping times. Researchers have shown that the decision to buy a product or not can be significantly affected by how long it takes the product to arrive. For retailers to fulfill these express shipping requests, they have to scatter their inventory across the United States rather than compiling it in one central location like traditional stores would.

Traditional stores require less overall storage space than E-commerce companies, too. This is because they have to ship items to a single location, rather than to separate locations around the world. With the latter requirement, items have to be more spread out and stored in a more organized fashion. This arrangement is expensive, but its what give established companies like Amazon growth opportunities that don't exist for smaller players.

Amazon has single handedly triggered the rise in warehouse rental prices. It has not only "spoiled" customers to expect fast deliveries, but it has actively been building a network of supply centers for its goods. Other companies like threadUp, a fashion resale website, have been forced to follow the same path. It is unlikely that Amazon's competitors can match the scale of it's distribution network in the near future, though.

© Amazon rozpoczął agresywne działania wobec konkurencji

Even so, Wall Street is still looking to invest in promising warehouse holding companies. CBRE (CBG  ), regarded as the world's largest REIT, is one such company. It has been seeking to buy more warehouse space for the last six years. It recently financed a $250 million portfolio devoted to this mission. Another promising company is Flexe, a privately held company that describes itself as the "AirBNB of warehouse storage". It is used on short notice by companies with excess merchandise. These companies are taking advantage of the E-commerce-led warehouse boom.

With customers flocking to sites like Amazon, dull storage centers are now in-demand properties. The free market has produced companies like Flexe that could not be imagined a decade ago. By developing high expectations from companies like Amazon, consumers are now the backbone of the movement. 

Sources:

"Amazon Prime Is Driving a Boom in Warehouses." The Fiscal Times. Web..

Page, Paul. "E-Commerce Drives Surge in U.S. Warehouse Rental Prices." WSJ. Web.

"Retailers Fuel a Warehouse Boom, Racing to Keep Up With Amazon." Bloomberg.com. Bloomberg, Web.