Large retailers and manufacturers are ramping up scarce storage capacity as excess merchandise fills industrial real estate

GSC Logistics ∕ October

From Business Hala:

Karen Galena, president of First Logistics, which has four warehouses in the Chicago area that provide space for retailers and manufacturers, said large customers are willing to pay higher prices for increasingly scarce storage space.

“It’s tough for the little guy,” Ms. Galena said, adding to labor and other costs for warehouse operators.

If smaller firms “are not covering their costs and cannot or do not want to increase their rates,” they may have to look for a new location, she said. “I’m getting calls daily from smaller companies being displaced from large warehouses.”

Andy Moses, senior vice president of sales and solutions at Penske Logistics, said warehouse operators are also focused on retaining customers with higher turnover of goods as handling fees bring in higher revenue.

“It puts pressure on warehouse operators to keep a close eye on their customer base and navigate it in a way that serves the biggest, most important and most loyal customers,” he said.

Small businesses face challenges finding warehouse space mirrors, many previously secured on container ships in the Covid-19 pandemic, when ocean carriers increased rates and made way for larger customers. Used to compete with small shippers.

According to commercial real estate services firm Cushman & Wakefield, the nationwide vacancy rate for industrial real estate was 3.2% in the third quarter, up from 3.8% in the same quarter a year ago.,

The vacancy rate was over 5% in the third quarter of 2020.

Space is particularly tight in the hottest logistics markets, including major ports such as Los Angeles and Long Beach, New York and New Jersey, and Savannah, Ga. In the distribution-heavy Inland Empire region of Southern California, the vacancy rate was 0.7% in the third quarter, according to Cushman & Wakefield.

According to Cushman & Wakefield, tight supply drove rental rates nationwide in the most recent quarter to an average of about $8.70 per square foot, compared to $7.13 per square foot in last year’s third quarter.

Warehouses are filling up for various reasons. Some retailers are stockpiling items like patio furniture that got caught in the supply-chain rush and arrived too late in this year’s sales season. others, such as Nike Inc.,

walmart Inc. and Target Corporation.

Pandemic-era consumers were caught short by changes in buying patterns and holding onto stockpiles of goods that they are trying to pull out before the holidays.

Some retailers are placing goods in shipping containers and on railcars outside their warehouses and stores, said John Morris, president of industrial and logistics for Americas for real estate services firm CBRE Group. Inc.

He said some companies are also generating revenue from unconventional storage space.

“If a customer has a site with rail siding and is not using it, we are helping some tenants lease that rail siding, which is having excess inventory,” said Mr. Morris Told.

Ashley Epperson, co-founder of Springfield, VA-based e-commerce retailer Salius Drinks, struggles to find storage for her small business selling bottled water.

Ms Epperson visited places already filled with goods from large companies looking for even more storage. Eventually, he moved his goods to a shared-location warehousing operator.

“It’s hard to find that specific thing that’s not going to, you know, require upfront costs, you need about $15,000,” she said. “You’re just like, ‘Holy smoke.’”



Read More News