The Demand for Additional Warehousing Space Is Expected to Spike
Posted by World Trade Distribution
Filed Under: Container Freight
Every industry has been impacted by the COVID-19 (coronavirus) pandemic and this has led to a paradigm shift in the way consumers behave. Many businesses have had to shut their doors during the past few months. This means that they have been unable to move their inventory.
Therefore, it should come as no surprise that there has been a surge in domestic inventory across the United States. With international exports being frozen and many parts of the country reluctant to reopen, companies are going to look for a place to put this excess inventory. The result will be a spike in the demand for warehousing across the United States.
More Capacity Will Be Needed
According to the real estate giant CBRE, even an increase of five percent in the inventories of businesses across the country would warrant close to 500 million additional square feet of warehousing capacity. Another warehousing and distribution developer, Prologis, recently announced that business inventories could end up rising by 10 percent during the next five years. The developer credits this to the disruption in global supply chains wrought by the pandemic. Prologis estimated that an additional 700 million square feet of warehousing space would be needed to cope with this increase.
Many experts have stated that this could cause the growth rate of the warehousing and logistics industry to double. This would be unprecedented growth for an industry that has felt the effects of the COVID-19 pandemic.
Paying the Price for Speed
During the past three decades, the goal of manufacturers and retailers has been efficiency. They have stuck to an inventory model that features the mantra as “just in time.” They have been looking to cut costs by reducing inventory, ensuring that goods are sold nearly as quickly as they are made. This minimizes the time that goods are spent in storage helping to cut costs. Even as they shipped jobs overseas to save money on labor costs, they were still able to stick to this model.
The coronavirus pandemic revealed the fragility of this model. With ports, borders, and facilities being closed, businesses are looking for ways to restructure. They do this as supply chains are disrupted and inventory starts to back up. In the meantime, companies are going to have to figure out what to do with the excess inventory. This is where the surge in warehousing demand comes from.
The Rise of eCommerce
It is likely that the new model that will rise from this pandemic is going to focus on eCommerce. With more people looking for goods on the internet and the rapid rise in mobile searches, eCommerce hubs at major transportation centers are already building strong fundamentals to make supply chains more resilient. eCommerce centers depend on strong, efficient warehousing services as a pillar of their business models. Therefore, this is going to add to the demand for more warehousing options across not only the country but the entire world.