Nov 16, 2018
The growth of ecommerce, advancements in AI and robotics, and tighter delivery expectations are transforming the Industrial sector landscape in the U.S. These factors drive strong demand for distribution and warehouse space, yet vacancy rates remain at an all time low, limiting the ability to expand rapidly in response to the market.
Record Low Availability in the U.S.
As of Q2 2018, the U.S. vacancy rate for industrial warehouse and distribution space remained at a record low of 5.2%. Despite more than 64 million square feet of new supply completed in the second quarter, availability continues to drop and rental costs continue to climb.
JLL Industrial Outlook Report Q2 2018
Innovative Approaches to Space
Market conditions have driven demand for warehouse space beyond major cities and into secondary and tertiary markets. Developers are being forced to turn to innovative approaches to distribution centers (DCs), including utilizing previously developed or industrialized land. Amazon is on the forefront of this approach: the ecommerce giant has secured a number of dead shopping malls to repurpose as distribution centers. With some analysts estimating that roughly 45% of shopping malls in the U.S will close in coming years, the market may see a number of logistics providers invest in this approach to increase capacity.
Others, such as San Francisco-based Prologis, have turned to the construction of multi-story fulfillment centers. While common in Asia, vertical warehouses are still a rarity in other parts of the world because they are approximately 50% more expensive to build. With increased land costs spreading out from major urban areas in the West,, developers and occupiers now realize that “going vertical” may be the only way to operate in – or at the very least, in proximity to – high-traffic cities in the future.
The location and number of facilities required to effectively serve customers is a major topic of discussion in supply chain and logistics. As the ecommerce landscape evolves, it’s more crucial than ever to prepare for the future with a strategic fulfillment plan. To read about our global fulfillment locations or for more information on how Ingram Micro fulfillment services can make a difference for your business, please complete the contact form.