Warehouse and distribution center vacancies are at historic lows, making it difficult for businesses attempting to break into the e-commerce marketplace on their own. 

E-commerce, subscription models, and omni-channel retail are changing the way shippers do business. From fast and free shipping to revamped last-mile delivery strategies, companies are investing heavily in the infrastructure they need to retain customers — customers who have plenty of choices when they do business online, from Amazon and Walmart to Wayfair and Alibaba. 

One of the most important additions to any supply chain infrastructure today is warehouse and distribution center space. With the optimal amount of storage, up-to-date picking, packing, and shipping technology, and strategic locations in key markets, the right facilities can go a long way toward keeping businesses viable in today’s fast-paced, ever-changing e-commerce economy. 

However, finding that space has become harder than ever. According to a report from real estate research firm CBRE, since 2015, the demand for warehouse space has outpaced the completion of warehouses by 169 million square feet. The report also notes that there is more than 255 million square feet of warehouse space under construction — 70.2% of it on spec. 

For shippers attempting to find the warehouse space they need to meet rising demand, these pressures are challenging to say the least. This is especially true for small and mid-sized businesses (SMBs) trying to compete with larger peers capable of making the capital expenditures necessary to build warehouses of their own. Thankfully, shippers confronting these challenges can turn to experienced third-party logistics partners (3PLs) for help. 

Understanding a Changing Marketplace

According to the CBRE report, rents have been pushed up 19.2% since 2015 as warehouse demand outpacing new construction completions. Five of the top ten markets for speculative development have vacancy rates below or slightly above the national average of 4.4%, which experts believe justifies adding more warehouse space. Additionally, these markets have seen aggregate net asking rent rise by 7.8% annually. 

CBRE notes that, in these key markets, demand is so high that nearly completed warehouses are expected to find tenants soon after they’re completed. E-commerce, food and beverage, wholesaler and third-party logistics users are expected to have the greatest need and most interest in these facilities once they become available. 

Challenges for Shippers

With vacancy rates for industrial space hitting their lowest levels in twenty years, shippers face a competitive real estate marketplace as businesses struggle to secure the warehouses they need to compete. This can be particularly challenging in critical logistics corridors such as Inland Empire, Atlanta, Dallas/Ft. Worth, and more — markets in which space is tight, prices are high, and location is key.

As shippers jockey for warehouse space sought out by more and more of their competitors, rents will remain high. Combined with the costs of maintaining these facilities on their own — especially those outfitted with the newest in logistics technology — businesses attempting to establish a footprint in the e-commerce space face an uphill battle. 

Securing Warehouse and Distribution Center Space

For shippers determined to break into the e-commerce space successfully, figuring out the best way to access warehouse space as close as possible to customers at a price point they can afford is a major obstacle. While securing this kind of space is a necessity with customers expecting faster delivery at low costs, businesses attempting to keep pace with industry changes will need to be strategic about their investments to make that happen. 

Accordingly, shippers should consider how working with a trusted 3PL can help. Indeed, by working with an experienced logistics partner with warehouse and distribution center facilities of their own, SMBs can tap into existing logistics infrastructure on a national — and even international — scale, all without having to make such capital expenditures themselves. 

With a proven track record in shipping and logistics, Primary Logistics has the resources shippers need to excel in the e-commerce economy. With logistics facilities located in key transit hubs — Los Angeles, Chicago, and New Jersey/New York — we’re strategically positioned to help you reach your customers as soon as possible. From warehousing and distribution space to comprehensive e-commerce solutions, our award-winning team has you covered. 

If you’d like to learn more about how award-winning shipping and logistics services from Primary Logistics, contact us today at (800)-635-0013.