5 Reasons to Invest in Warehouse Space (and other investment tips from Amit Raizada)

Reeling in more than $600 billion in sales in 2019, online retailers like Amazon are quickly displacing shopping malls and big box department stores as Americans’ favorite venues for consumption.

This new trend has given way to a seismic shift in the commercial real estate landscape. Once regarded as low-risk, low-reward investments, warehouse space has become a valuable commodity. According to a recent report by CNBC, demand for warehouse space – driven largely by online retailers – has outstripped supply by nearly 170 million square feet. This disconnect between supply and demand creates a lucrative opportunity for aspiring investors.

Here are five reasons why your investment portfolio won’t be complete without warehouse space.

1. Online retail is growing fast

The online retail market isn’t just a fluke. According to a report by Smart Insights, the industry is forecasted to expand by 19% in 2020, an astronomical rate of growth.

Investment Tips from Amit Raizada

To Amit Raizada, CEO of Spectrum Business Ventures and an early investor in warehouse space, this was no surprise.

“I base a lot of my investment strategy off observing the preferences of young people,” he said. “And they like convenience. As Gen Z begins to encompass a wider swath of the economy, convenience-based online shopping is bound to keep growing.”

These online retailers need somewhere to store their inventory – and that somewhere is warehouses. As online shopping grows, so will demand for new warehouse space.

2. Online retailers need warehouses for ambitious same-day shipping programs

Online shopping has brought about an interesting paradox: as retailers like Amazon take unprecedented steps to offer consumers faster delivery, consumers respond by simply demanding more convenience. In a bid to satisfy this desire, Amazon has begun to expand its same-day shipping offerings.

“In order to make the logistics of this work, Amazon will need to start overstocking inventory in key markets to preempt online orders,” Raizada said. “I’d recommend that aspiring investors look at new warehouse space, because Amazon and online outlets are really going to need it.”

3. The warehouse supply shock

The rules of supply and demand are simple – when there is limited supply of a product that is in demand, the value of that product goes up. This is very much the case with warehouses.

As CNBC reported, retailers are demanding 170 million more square feet of warehouse space than what can currently be supplied. Online sellers need this space to continue to drive their precipitous growth, and they’ll be willing to pay for it. Aspiring investors should take advantage of this disconnect between supply and demand and of the high value per square foot that it will create.

There is some urgency, though. Supply will eventually catch up; and now is the time to get into the market.

4. Warehouse space can be innovative

Warehouse space may not seem as flashy as tech or entertainment, but the industry is still ripe for innovation.

One way that Raizada recommended investors should consider doing this is by looking for warehouse in the immediate vicinity of major airports and transit hubs. A location where companies can easily store goods without having to incur hefty shipping costs is ideal for major online retailers.

5. Invest in the markets of the future

Aspiring investors, Raizada said, should look for opportunities in the markets that will define the future of consumption. Ideas, products, and firms that may seem outlandish in 2020 could be economic mainstays by 2030. According to Raizada, however, there is a qualifier.

“Look for cutting-edge new markets and technologies, but also look for the peripheral opportunities that result from these new markets,” Raizada said. “Warehouse space is one of these. It’s a way investors can get into the online shopping market without having to found a competitor to Amazon.”

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