During the first Internet boom, Hamid Moghadam, like many entrepreneurs, believed that the Internet would one day completely change the way people shop.

Moghadam, a real estate investor at the time, sold a large portion of his portfolio for shopping malls and invested cash in warehouses and a $5 million stake in Webvan, a pioneering online grocery store.

Webvan quickly went bankrupt. But these warehouses are the buds of one of the largest real estate companies in the world today. Nearly 1 billion square feet of warehouses in 19 countries/regions controlled by Moghadam’s real estate investment trust company Prologis are important nodes for e-commerce and are also home to tenants such as Amazon, Wal-Mart, and Home Depot.

“Actually, we have had no new ideas since 1999,” 64-year-old Moghadam joked about the rise of Prologis.

If this warehouse was once mocked as “four walls and one roof” in the property market, it has become a sensation in the past year. Coronavirus disease pandemic This has triggered a surge in online shopping and a corresponding demand for facilities that handle all of these products.

As part of overall retail sales, e-commerce has jumped from approximately 15% before the pandemic to approximately 25% after the pandemic. The boost to Prologis’ business is even greater, because warehouses used for e-commerce require more square feet than traditional warehouses to handle product returns and other space-consuming chores.

As the dark clouds of the Covid era shrouded office buildings, shopping malls, business hotels and other real estate categories, investors rushed to put money into warehouses. The private equity group Blackstone Group has purchased a $100 billion warehouse, and its president Jonathan Gray recently identified e-commerce as “the company’s number one theme.”

Vince Tibone, an analyst at the real estate research company Green Street, used the industry jargon of warehouse and logistics assets to say: “Being an industrial owner is very, very good.” “E-commerce is a huge tailwind behind the industry.”

Mohadam did not expect the pandemic to develop in this way. After the 2008 financial crisis, some companies with warehouses were highly leveraged and were in trouble.

“Our initial reaction was that it would be very bad, and we actually slowed down some development speed… a little bit closed the hatch,” he said. Instead, he found that the growth in e-commerce he had been predicting over the next 5 to 10 years would happen within a few months.

Moghadam predicts that as the epidemic in the United States and Europe eases and people no longer stay at home, the share of e-commerce in retail sales may temporarily decline. But he believes that the growth of the industry will resume and accelerate.

“A whole generation of people who are not e-commerce consumers-senior citizens-have now seen convenience and magic… and will not go back,” he said. Moghadam also believes that companies are beginning to reverse the decades-long trend of inventory reduction.

“All those supply chains that are really adjusted and optimized for efficiency are emerging… any kind of unexpected outages. That’s why you encounter all these shortages,” he said.

“For a company, losing sales because they don’t have goods to sell to customers-it’s more than just offsetting [the] Savings from reduced inventory. ”

Moghadam’s own background is a sharp reminder that things can change drastically. When he was 16, his father who was a residential real estate developer in Tehran passed away. Moghadam left to study at the Massachusetts Institute of Technology, where he earned two engineering degrees. He went on to Stanford Business School, planning to return to China and take over the family business. Then came the Iranian Revolution. Moghadam stayed in the United States, but it was difficult to find a job.

“It was 1980, and the inflation rate was 14%. Oh, yes, by the way, they hijacked the American hostages in Iran and they played it on TV every night,” he said, adding: “I never I don’t feel too safe about anything. Whenever things go well, I start to become impatient and think about what might go wrong.”

On a recent morning, a large and tidy Prologis warehouse in Elizabeth, New Jersey showed the evolution of these facilities over the decades—from static buildings where workers occasionally purchase items to dynamic buildings where goods are constantly moving in and out.

The 645,000-square-foot factory is operated by Fedway Associates, a liquor distributor that can deliver up to 47,500 boxes a day, each with its own mixed bottle — many ordered the day before. They enlarge the conveyor belt over five miles and then store them on the truck in the correct order to match the computer-generated delivery route.

What attracted Fedway to this website? It is located between one of the busiest seaports in the United States, the international airport and the Jersey Turnpike. However, strangely enough, Fedway is most attracted to parking lots. “If you ask an industrial user, what is the primary need for people when looking at space? Parking,” said Robb Sansone, Fedway’s chief financial officer. This is because as companies increasingly make “last mile” deliveries, they need more trucks—and space to park and load them.

Due to the influx of funds into warehouses, Prologis is facing more competition from Blackstone and other companies as the supply of suitable land continues to decrease, especially in built-up markets such as New Jersey and Los Angeles. The good news is that the shortage has supported strong rents. Green Street predicts that next year’s US warehouse rental growth will reach a record 8%.

But land prices are rising, and companies need larger facilities. Some developers have already begun to transform declining shopping malls into warehouses. These advantages are that it is located in the middle of the population center, making it easier to reach customers. But it turns out that residents don’t want trucks rumbling through their towns, and retailers don’t want neighboring stores to become warehouses.

“We may have seen a thousand opportunities, we are doing, for example, three or four. There are some, but they are difficult to do,” Moghadam said.

Therefore, the company is trying to squeeze new vitality from old facilities that may lack scale and modern facilities but are located in places such as the Bronx. Moghadam said that these buildings have been written off, but now they “are really great warehouses by virtue of their location.”

Prologis is also trying a new approach: It hopes to sell more services to its tenants, especially smaller tenants. For example, it can not only rent their space, but also provide their Internet services or purchase their forklifts. A public service program launched by Prologis a few years ago aimed at training students to work in warehouses, which may become a business.

“These are not permanent professional jobs, but they are jobs that pay $25 an hour,” Moghadam said, claiming that widespread criticism of warehouse employment conditions has been exaggerated. “They were good at work at the beginning, and they are definitely better than taking opioids or anything else.”

He speculated that in the future, Prologis may enter the energy business by using its rooftop solar panels to generate electricity for its customers’ electric trucks. “By introducing more of these adjacent products and services, you need to be able to use our facilities. This is a real opportunity to help customers,” he said.

This is Moghadam’s original idea-but there are some new wrinkles.