Warehouse Demand Continues to Rise into 2021

Globe St. reports increasing demand for warehouse space as e-commerce continues to grow.

Demand for warehouse space continues to increase as the coronavirus pandemic pushes businesses to adapt their supply chains to ongoing market demand. 

In March 2020, many businesses were forced to close their doors as city and state governments implemented stay-at-home  orders and millions of people began to shop online to follow social distancing guidelines. With millions at home, there has been a drastic increase and reliance on  e-commerce use as consumers seek safer ways to shop and businesses implement online operations. As a result, there has been a drastic increase in e-commerce. Businesses are changing their operations to and there’s a need for warehouse space to hold inventories that used to be held in brick and mortar stores. 

As of February 2021, e-commerce use remains dominant and businesses are expected to take further steps to adapt their supply chains and operations in the new year. As the pandemic continues, consumers are showing a strong preference for online shopping to increase public safety, instead of going in stores. Businesses that used to rely on foot traffic are now forced to adjust their operations for a long-term solution that incorporates e-commerce, as well as operations that support reverse logistics and shipment returns. To accommodate consumer demands, companies are experiencing a need for larger inventories, or at the very least more warehouse space, as inventory that was once stored in brick and mortar shops, is no longer an economic solution. 

This rise in demand for warehouse space has had a significant impact on the industrial real estate market. The overall need for more warehouse space by companies has led to the construction and expansion of existing warehouses. According to CBRE Economic Advisors, an estimated 1.5 billion square feet of industrial space will be needed in the United States over the next five years. 

Companies with limited distribution markets, such as domestic companies with limited regional access, are seeking new real estate and warehouse space across the United States to help continue operations and prevent slow distribution. Changes in company operations and growing reliance on these warehouses pose  a need for more accessible and available distribution markets across the United States. 

Another underlying issue that the pandemic is bringing light to is the global supply chains, and international markets. Since restrictions have been placed on global travel, supply chains have been disrupted leading to businesses looking to relocate manufacturing and warehousing domestically.  International or coastal companies that rely on seaports with limited warehouse space   are looking to further expand their operations to increase access to markets and distribution channels. With varying border restrictions and controls due to the COVID-19 pandemic, businesses and their access to global markets are limited, changing channels of distribution and slowing down operations. Supply chains and market demands continue to be disrupted with changes in restrictions, access to channels of distribution, and availability of space. 

“As warehousing storage becomes increasingly valid for businesses to profit during the pandemic,” says Craig Riggins, Vice President of Brown West Logistics, “it’s important that companies do their research and make sure they are selecting a warehouse that meets their logistic needs, not just have an optimal location.”

As the coronavirus pandemic continues to impact businesses in the United States and across the world, the demand for warehouse space will only continue to increase with the rise in e-commerce and the need for larger inventories. With the current opportunity for growth and consumer demand, businesses search for new industrial real estate with the goal being access to markets, construction and expansion of warehouses  to make their supply chains more efficient. 

Kamlesh Bakshi