Demand for Warehouse Space Surges in the U.S. Driving the Need for Warehouse Optimization

Craig Meyer, president of JLL’s industrial group in the Americas, said nationwide vacancy rates across 14 billion square feet of industrial real estate are at 4.8 percent, which is the tightest it has been in the U.S. According to a new study from JLL, the e-commerce sector will increase significantly, driving the need for even more space. The study, titled The Future of Global Logistics Real Estate, is based on a survey of 720 logistics experts in 43 countries and territories.

. . . nationwide vacancy rates across 14 billion square feet of industrial real estate are at 4.8 percent, which is the tightest it has been in the U.S. According to a new study from JLL, the e-commerce sector will increase significantly, driving the need for even more space. 

“E-commerce continues to propel a huge wave of industrial leasing globally, and the demand is becoming more widespread across all industries,” Meyer said. “The number of unique active tenants has surged as companies rush to build up their e-fulfillment capacities and, despite a normalization of the market as the effects of the pandemic wind down, we expect to see this trend hold strong over the next three years.”

Last year, e-commerce was the overall standout performer in the logistics sector, marking the highest year-over-year growth take-up by any occupier group globally. It represented over 16 percent of 2020 total logistics and industrial leasing in the U.S., according to the JLL report.

What’s more, the increase in e-commerce sales is creating a surge in demand for warehouse space close to major ports, making storage space harder to find and more expensive, the Wall Street Journal reported.

With demand increasing and supply struggling to keep pace, prices are on the rise. A new report from CBRE Group Inc., a real-estate group, said asking rents across the U.S. were up 7.1 percent year-over-year earlier this year. In some areas, such as northern New Jersey, rents were up 33.3 percent over the same period last year.

E-commerce growth is also affecting operations inside the distribution center, and warehouse flows are becoming more complicated. Consumers expect fast deliveries and seamless returns, adding to demands being placed on shippers to achieve customer satisfaction.

Making the Most of Available Space

Given current capacity constraints, it is critical for shippers to optimize their warehouse layout, operations and warehouse flow to make the most of available space. That starts with choosing the right geographic location. Strategically positioning warehouses allows shippers to get products to customers quickly without having to pay for expensive shipping upgrades. As an example, ITS utilizes warehouse locations in both Sparks, Nevada, and Indianapolis, Indiana, which means shipments can reach nearly 90 percent of the United States population in two days.

Within the walls of a warehouse, optimization starts with engineering the right racking solutions and establishing aisle widths, which can be dictated by the size of the physical space, lift equipment needed, inventory numbers and product needs.

The right slotting optimization and patterns are also vital. Engineers can draw on data to create the ideal storage system and the warehouse management system can establish rules for where products are placed, creating the most efficient warehouse layout. The footprint is driven by the number and velocity of SKUs as well as the scalability or the operations and the anticipated growth rate.

Wearable devices, robots, barcode scanners and other modern adaptations of long-standing warehouse technology are also improving warehouse efficiency and automation. The right solutions increase order fulfillment speeds and maximize the picking and packing process. Plus, the type of pick, such as zone picking, batch picking, cluster picking or wave picking, can help squeeze the most product into the least amount of space and maximize operational efficiency and productivity.

As warehouse space tightens and customer demands continue to increase, customized technology to produce seamless, real-time order processing, complete end-to-end visibility of customer orders, order status and lot tracking will take on greater importance. ITS Logistics has invested in customized technology solutions and its team members have years of expertise in dedicated fleet services, all types of fulfillment services and distribution services, and carefully curated carrier and shipping provider relationships to help you keep your costs down.

“One of our company values is ‘Continuous Improvement’ and it’s something we incorporate on behalf of all of our customers every day. So when costs start rising outside of your control like warehouse space, labor costs, shipping costs—we can help with warehouse optimization solutions that will give you a competitive advantage and enable you to run your distribution and fulfillment process as efficiently as possible.”

Kasia Wenker, ITS Director of Supply Chain Solutions

Learn more with ITS Logistics

To learn more about the wide range of warehousing, fulfillment and distribution services that ITS offers, or if you have any questions about the current market and warehouse optimization, call Kasia Wenker, ITS Logistics Director of Supply Chain Solutions at (775) 353-5160 today.