America Needs More Warehouse Space ASAP

Warehouse utilization has reached critical mass, and the U.S. urgently needs more facilities right now.

The total number of warehouses has rapidly increased during the last 10 years, reaching nearly 10 billion square feet of space in the first quarter of 2021. During the 2020 e-commerce boom, some predicted the country would need an additional 1 billion square feet of warehouse space by 2025. Such estimates could not have foreseen that historic surge in imports that has overwhelmed facilities in recent months.

Logistics experts pointed out that part of the ports of Los Angeles and Long Beach bottleneck is driven by a lack of warehouse space. Industry insiders have gone on the record indicating Southern California warehouses were at or near 100-percent capacity. Freight management professionals are experiencing a similar trend on the East Coast.

“We are either at or over capacity, and demand for space is the greatest I have ever seen,” Michael Sarcona reportedly said, who operates warehouses near America’s third-largest port in Newark, N.J.

Industry leaders indicate that an effective supply chain enjoys upwards of 15 percent warehouse vacancy to deliver flexible use and streamline goods and materials movement. Sarcona’s facilities are reportedly operating at approximately 98 percent capacity, leaving on 2-percent wiggle room for freight movement. Busy ports such as Newark, L.A., and Long Beach, naturally test space availability during seasonally-high freight demands. However, the national average warehouse space availability remains unusually packed.

National warehouse usage averages reportedly stand between 3-4 percent availability. That’s a far cry from the 15 percent needed for a smooth operating supply chain. The 1 billion square foot estimate predicted in 2020 would still leave the U.S. under 15 percent. But while the need for more warehouses remains urgent, some view the current strain as something of a consumer bubble.

“Companies are trying to do two things. They’re scrambling to bring into the U.S. as much as they can while they can because they’ve seen what factory and port disruptions can do. But fundamentally, they’re trying to keep up with our record surge in shopping,” NPR’s Alina Selyukh reportedly stated during a warehouse discussion. “People have unleashed all their cooped-up pandemic anxiety and all the money not spent on traveling and going out on buying stuff — furniture, clothes, computers ordered online, delivered within days.”

If that theory proves correct, American consumer purchases could wane in 2022 as the stimulus money runs out and pandemic anxiety wears off. Amazon, the most recognized e-commerce and delivery corporation, appears to be betting that consumers continue to increase demand. Since 1994, Amazon has increased its warehouse footprint to 110 fulfillment centers, including upwards of 15 in the last four years.

Sources: abcnews.go.com, cnbc.com