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Reverse Logistics Driving Demand For U.S. Warehouse Space

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Industrial real estate, which has already benefited from the rise of e-commerce, is experiencing a boost from what is now known as reverse logistics.

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Reverse logistics is the process of consumers returning items bought online, and it is spurring the need for more warehouse/distribution space. All of those items have to go somewhere

A recent report on the phenomenon by CBRE estimates that a reverse logistics supply chain can require up to 20% more space than an outbound supply chain.

As e-commerce grows, so will storage demand for consumer returns. In fact, the ease of returning items at little to no cost is one of the reasons consumers have come to accept shopping online as an alternative to traditional physical stores.

Historically, retail returns comprise 8% of total sales, CBRE reports. E-commerce return rates are much higher at 15% to 30%, depending on the product type.

Traditional distribution channels weren't designed to handle many returns, so many retailers are turning to third-party logistics firms to do so. As that occurs, 3PLs have become major drivers of industrial real estate demand. 

In the first half of 2018, CBRE found that 3PLs accounted for more than half of the largest warehouse leases in the U.S. Nationwide, 3PLs occupy about 700M SF and their total space has been growing at 3% to 5% annually, the company says.