The majority of American warehouses are built for the preceding century forcing e-commerce companies to trade-off some logistics requirements for others.
According to a report published by CBRE Group, about 1 billion square feet of modern warehouse space was built in the last 10 years accounting for 11% of the U.S.’ total warehouse inventory of 9.1 billion square feet.
Further, one billion square feet of warehouse space is more than 50 years old and has heights of less than 20 feet. Warehouses built since 2008 are generally three times larger than older warehouses, accounting for 4% of the nation’s total.
This means that 89% of all the warehouse space in the country cannot accommodate all the logistics needs of e-commerce markets, which is causing some companies to trade-off requirements.
“I would say every major e-commerce user out there is dealing with some kind of compromise,” said Adam Mullen, CBRE’s senior managing director and Americas leader for the industrial and logistics division, to supplychaindive.com.
“We see it more as an opportunity than a challenge. With that we’re seeing really strong demand in the warehouse space, because e-commerce users need more space to serve consumers. So it’s actually been a really ripe opportunity for our marketplace.”
CBRE states the life expectancy of modern warehouses is 34 years. The report also notes the warehouses have ample developable land and are near major centres whereas older warehouses are located in heavy industrial and shipping centres.
“Given the low share of modern warehouse space and the rise of e-commerce, there’s ample opportunity to develop new warehouses and rebuild physically obsolete ones in the best infill locations,” read the report.
The costs to do this type of build can be high as older warehouses are usually located in densely populated areas where costs are higher than in more suburban or rural areas.
Another phenomena of e-commerce is the building of tertiary markets for warehousing such as Lehigh Valley. E-commerce sites such as Amazon, Walmart and Zulily have set up logistics hubs there and FedEx built its largest North American distribution facility in the Pennsylvania location.
Supplychaindive.com notes the reason for the success of Lehigh Valley is its proximity to large metropolitan areas, its abundance of developable land, a diverse industry base, and a large labour force.
“Another hub like Lehigh Valley will certainly develop, but by studying Lehigh Valley companies can jump ahead of the curve and get in on the warehouse space before it gets crowded.”