Warehouse space is the newest thing to hoard

As retailers and logistics companies try to stock up on goods to combat supply chain problems, they are facing a new challenge: In many parts of the United States, there are few or no space to store goods.

The shortage of commercial warehouses and industrial space is the latest fallout from the pandemic’s dramatic growth in online shopping and shows little sign of abating. But this restriction is prompting new thinking about how to manage storage, handle distribution and establish new delivery systems for everything from pet food to beauty supplies.

Logistics companies are taking a number of steps to deal with the scarcity of storage space, such as signing deals for new space before space breaks and expanding the search for remote locations. more coastal ports, to areas such as Knoxville, Tenn; Lehigh Valley in Pennsylvania; and Reno, Nev.

They are also re-imagining the commercial warehouse space they already occupy. And in densely populated areas, where land is scarce and zoning is limited, they are competing to build taller warehouses or move their goods into smaller spaces like empty stores. closed during the pandemic.

“The supply-demand imbalance is more severe than I have seen,” said Robert Thornburgh, chief executive officer of the Office and Industry Brokers Association. “Industrial space is limited. It almost evaporates before your eyes, if you’re even lucky enough to know about it.”

Atlanta, the Dallas-Fort Worth and Lehigh Valley areas had the most industrial space under construction in the fourth quarter of 2021, and the national vacancy rate fell to 3.2%, according to the report. a study from CBRE . Group. Research shows rents rose 11% in the quarter, setting a record.

For months, Maribel Koella, an industrial real estate agent in Knoxville, had nothing to offer.

The vacancy rate for warehouse space in Knoxville and the surrounding area was about 1.4% a few months ago, and it’s even tighter now. “I don’t know where we’re going to get the product,” she said.

Further complicating the competition for space are large warehouses attracting high-tech production and Life scienceWhere space is extremely tight, says Steve Kapp, chief executive officer of Newmark’s East San Francisco Bay Industry division in Oakland, California.

Greg Sanguinetti, president of Pro Group Logistics at Sparks, adds that in the wake of the space crisis, companies are not only stocking up on goods for future sale, they’re also stocking up on warehouse space when they can, right away. even if they can’t fill it yet. , Nev.

“Companies are taking over warehouses with 50% more space than they need,” he said. “They are reducing operating margins just to increase the infrastructure for them to have that.”

The tight warehousing market has prompted logistics companies to try different strategies for storing and moving goods around the country.

Mr. Sanguinetti has found a way to reduce the idle time of truckers: He has expanded his company’s service to allow truckers to drop off, pick up an empty container and leave without waiting. unloading.

That significantly reduces wait times, said Mr. Sanguinetti, reducing the risk of truckers having to stop work because they’ve reached the maximum federal hours they can drive.

“We have a little bit of champion pleating companies, to mention short haul carriers,” he said. “Everybody’s looking for a way to get this done.”

Since some of the containers arriving from the ports include stacked cargo boxes that need to be unloaded individually and cannot be taken out by forklift, his company is offering to unload the containers and provide pallets. for the next delivery, his own trucking service can provide.

In the past two years, his company has expanded the warehouse space it leases from one 40,000 square foot building to four 300,000 square feet buildings. Even if the supply chain slowdown eases, the challenges it highlights will not go away anytime soon, Mr. Sanguinetti said.

Small spaces can be brought to market before many people even know about it.

“Space is limited — rental buildings are close,” says Robert Coon, commercial director of Dotcom Distribution, a rental company in Edison, NJ, from Prologis, a real estate investment firm. as quickly as people sign the lease of the premises. trust that supports the warehouse. The company uses its warehouse space to store beauty products, toys and other items for about 20 retailers.

The company’s lease comes into effect in 2023, and Mr. Coon has already begun thinking about next steps. Dotcom has been in the space for 21 years and it is looking for alternatives. But Mr Coon did not rule out staying the same, despite what he predicts could be a significant increase in rents.

One option for some companies is a multi-storey warehouse, with ramps and truck terminals on multiple floors.

Dov Hertz, founder of DH Property Holdings, these properties have begun to appear in urban areas, where prompt deliveries have become the norm and companies have begun stocking up on supplies to prevent shortages, said Dov Hertz, founder of DH Property Holdings. He said he plans to open a three-story warehouse in Red Hook, Brooklyn, in the third quarter of 2022, adding that it has been fully leased to Amazon.

“Distributors must have additional sources of supply to resolve conflicts in supply chain distribution,” said Mr. Hertz.

Stacy Mitchell, co-director of the Local Self-Help Institute, says small businesses, which depend on local and regional manufacturers, can pivot more easily with supply chain disruptions than they can. some larger companies are more dependent on foreign manufacturers.

But at the same time, as larger companies absorb the available warehouse space, smaller companies suffer. “Small businesses are marginalized and marginalized,” she said.

Some small retailers are becoming more strategic by using open space in closed neighborhood businesses, as well as freeing up space in their stores because they have fewer direct customers. and more online orders.

Gina Schaefer struggled with storage issues before the pandemic, but has seen demand increase over the past two years.

“We have to make the most of everything we do,” said Ms. Schaefer, founder and chief executive officer of A Some Cool Hardware Stores, a chain of 13 Ace Hardware stores between Washington and Baltimore. “We can’t buy big warehouse space in the suburbs and send runners.”

Currently, the company leases space from a local self-hosted company and uses a garage that comes with a hardware store it has acquired. Since the pandemic increased interest in home improvement projects, hardware stores have weathered it successfully, she said. That means the company, which has about $50 million in revenue in 2021, could potentially sell more items if it could store them.

Jonathan Gold, Vice President of Supply Chain and Customs Policy at the National Retail Federation, was looking for a digital solution that could address supply chain slowdowns and space scarcity in the UK. warehouse.

He envisions a privately managed system, rather than an open data portal managed by the government. A unified database showing the movement of a container from port to unloading place and data on available space for unloading, storage and last mile deliveries, he said, would be a good place to go. begin.

“Everybody agrees that we need better data and earlier in the process,” he said. The challenge is, how do we come together and make that happen so it’s not a competition? ” Warehouse space is the newest thing to hoard

Fry Electronics Team

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