Every foot counts in warehousing
Date: Friday, June 1, 2018
Source: American Shipper
Escalating demand for freight storage in the United States is not expected to let up anytime soon, but industry analysts say various measures can be taken by warehouse operators and shippers to ensure that every available square foot of space counts.
A combination of factors has ratcheted demand for warehouse space, including the e-commerce boom and increased product demand from a consumer market benefiting from low unemployment. The monthly unemployment rate in the U.S. stood at 3.9 percent in April, the lowest since December 2000, according to data from the Labor Department’s Bureau of Labor Statistics.
In addition, an influx of U.S. manufacturing has become a new driver for warehousing in the past 12 to 18 months, in particular for additive manufacturing, Chris Zubel, a managing director at real estate firm CBRE, told American Shipper.
During the first quarter of 2018, availability in the U.S. industrial market clocked in at 7.3 percent, the lowest level since the first quarter of 2001, while net asking rents totaled $7.01 per square foot during the quarter, the highest level since CBRE began tracking this metric in 1989, CBRE said in its report, Q1 2018 U.S. Industrial & Logistics Figures.
Forty-one million square feet of warehouse capacity in the industrial market was absorbed during the quarter and 35 million square feet of new space was delivered, while the under-construction pipeline totaled 244.5 million square feet.
Shipper Needs. With the increased demand for warehouse space, shippers are now facing higher hurdles to secure this capacity for their goods.
Warehouse providers are committing their users to longer leases than previously to maintain a steady stream of income to help pay down these capital investments.
For example, if a warehouse has a conveyor or material-handling system, the property owner will demand a longer lease to ensure a return on that investment, Zubel said.
“Start planning now for future growth. Don’t wait until you run out of space to look for additional capacity,” A. Duie Pyle Chief Operating Officer Frank Granieri said. “Also reach out to a transportation and logistics company that can work with you to help find a solution and accommodation you may otherwise not have considered.”
Transportation and logistics services provider A. Duie Pyle operates 10 warehouses across the Northeast and mid-Atlantic. All of its facilities are high bay, greater than 100,000 square feet and built with the adaptability to handle constant changes in warehousing and distribution, Granieri said.
The company is slated to add another 300,000 square feet over the next 18 months.
Shippers, however, must take into account myriad factors when selecting warehouse space, including meeting any requirements for assembly work, seasonal and high- and low-demand goods, particular rail and road accessibility requirements, and market access.
“Many companies are looking for facilities to be spec’d, modernized and customized to their needs. Or at least they need a provider with flexibility/capability for such,” he said.
Granieri highlighted the specific warehouse needs of food and beverage shippers. “These companies need to consider the age, condition, cleanliness and cohabitation/product compatibility of facilities they use,” he said.
Modern Capacity. Warehouse providers could gain a huge competitive edge by building facilities that are equipped to handle e-commerce.
Another CBRE report, Old Storage: Warehouse Modernization in Early Stages, showed that the majority of the nation’s warehouse capacity is decades old and ill-suited for the demands of modern e-commerce.
CBRE, which said the average age of U.S. warehouses is 34 years old, found most facilities built prior to the mid-2000s already have limitations that preclude their use for e-commerce distribution, such as low ceilings, small footprints, uneven floors and inadequate docking.
Nowadays there is strong demand for modern facilities with larger footprints, high ceilings and proximity to major population centers.
“Many of the oldest markets are in the Northeast, led by northern New Jersey with an average warehouse age of 57, Pittsburgh (56), Boston (44) and Philadelphia (44),” CBRE said. “The youngest markets mostly are in the West and South, led by California’s Inland Empire (20 years), Las Vegas (23), Phoenix (26) and Atlanta (29).”
Meanwhile, e-commerce is expected to disrupt where food is stored and how it’s delivered to homes, with online grocery sales poised to reached $100 billion by 2024, or 13 percent of total grocery sales, according to the Food Marketing Institute and Nielsen. That’s up from $19 billion in 2017, or 3 percent of total grocery sales, CBRE said in its report, Cold storage: About to heat up?
“Depending on the property type used to fulfill online grocery sales, up to 35 million square feet of cold storage for food distribution could be shifted from retail to industrial properties,” the CBRE report said.
Workforce Optimization. Warehouse and distribution centers operators also are under pressure to offer shippers the most up-to-date technologies available to boost speed and efficiency and maximize space with fewer employees.
This trend is further driven by the fact that warehouse services providers are finding it increasingly difficult to attract and retain employees. This problem has been further exacerbated by the decline in unemployment and disinterest among millennials to work in warehouse environments.
One solution that’s being deployed is WorkJam, a web and mobile app that enables better communication within these operations.
Essentially designed to be used in any environment where there are hourly employees, particularly non-desk workers, WorkJam digitizes communication channels, from scheduling, training and peer-to-peer integration, WorkJam CEO Steven Kramer told American Shipper.
Employee turnover is extremely high in warehousing because the work often comes in waves and schedule predictability is difficult. There is also a lack of engagement and a high amount of disconnect, Kramer said, adding that robotics and automation are putting pressure on some of these job openings.
Through WorkJam, warehouses and distribution centers can better optimize their current workforce. Within 15 minutes of being hired, an employee can download WorkJam, log in and immediately begin training, and the app records that training, meaning employees can get paid during that time, Kramer explained. This allows workers to be cross-trained in different roles, giving them more opportunities, while warehouses and distribution centers benefit from a more efficient workforce.
Employees are alerted when shifts they are qualified for become available, giving them the ability to opt in. This helps with fluctuating labor needs in an industry that changes seasonally as well as with the ebbs and flows of the economy.
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