The impact of the protracted COVID-19 pandemic continues more than seven months following initial shut-down measures that began in March. While many commercial real estate sectors continue to struggle with decreased demand from both investors and occupiers, the industrial sector remains a surprising benefactor to the rise in consumer spending. Despite the uncertainty surrounding an additional government stimulus package and the upcoming election, estimates for the next holiday season are largely positive.

According to new research by consulting firm Deloitte, 2020 holiday retail sales are likely to increase between 1% and 1.5% from November through January. Additionally, a 35% increase in seasonal online sales, combined with traditional brick-and-mortar retail sales, is expected to result in roughly $1.150 trillion in sales during the November-January time frame. Retailers will undoubtedly aim to recover some of the lost revenue due to the pandemic during the seasonal rush.

The U.S. Census Bureau of the Department of Commerce also reports that second quarter 2020 U.S. retail e-commerce sales grew by almost a third (31.8%) from the previous quarter, or 44.5% year-over-year. While much of this growth will be attributed to Amazon, as they continue to fulfill their commitment to increase their footprint by 50% across the country, a number of occupiers are also active in the market with space needs in multiple markets.

Considering the trajectory of e-commerce growth, it should come as no surprise that nearly 72% of demand from companies focused on multi-market activity come from retailers that have increased their online presence, or have committed to improving their omnichannel strategies. Costco, TJ Maxx, and Walmart are in need of more than 5 million square feet – mostly concentrated in Canada and West Coast markets. Home improvement retailers, Home Depot and Lowe’s Home Improvement, have proven to be major players during the pandemic as well. With a significant portion of the population working from home during the health crisis, many began to tackle long-delayed projects at home, inciting a surge in sales. Home improvement projects are up in nearly every category – from kitchen and bath remodels, to repainting and general repairs. With the elevated pace of do-it-yourself (DIY) projects projected to continue, to meet this demand, Home Depot and Lowe’s account for nearly 9.8 million square feet of new space requirements, or 54% of the General Retail and Wholesale total.

In an analysis of 15 major markets in the U.S. and Canada, nearly 21 million square feet of industrial demand in North America comes from companies looking for space, or committed to space, in multiple markets. Much of that demand – nearly 50% – is concentrated in the South region in Atlanta, Tampa, and Norfolk. Other major markets in high demand include Chicago, Phoenix, Vancouver and Toronto. Following home improvement companies TJ Maxx, Costco, XPO Logistics Walmart, and PepsiCo all have requirements greater than a million square feet in North America.

Although significant disruptions to supply chains and global trade will undoubtedly persist in the post-COVID-19 era, the industrial sector remains poised for growth. Demand will continue to be fueled by consumers spending more online, propelling the explosion of e-commerce retail. Big-box omnichannel retailers, third-party logistics providers and food and beverage manufacturers that support both e-commerce and fulfillment will continue their expansion efforts in North America.

Amazon will remain a major player in the industrial real estate sector for the next couple of years, but retail and logistics growth cannot be limited to a single company. Industrial will continue to be the strongest real estate sector for the foreseeable future as companies spread to multiple markets in an effort to reach their consumer base sooner. We expect the industrial market to maintain solid fundamentals for the remainder of 2020 to meet this demand, which will further support new industrial development beyond the pandemic.