Warehouses are overwhelmed by the shopping frenzy in the United States

Doug Kiersey has been building, buying and leasing warehouses for almost 40 years. He’s never seen a moment like this.

“It’s completely unprecedented,” said Kiersey, president of Dermody Properties, which has warehouses used by some of the nation’s largest retailers. “In some markets … we’re over 99% occupied.”

Simply put, America’s warehouses are running out of space. Everything is claimed and sparkling at the seams.

How did it happen?

Warehouses have become a key middle link in the country’s supply chain. Sofas, phones, floors, and pretty much anything a buyer can buy go through them. Today, the United States is dotted with more warehouses than ever before. But they are overwhelmed by the lack of manpower to get goods in and out quickly, by the lack of truck drivers and wagons to transport things – and most importantly, by the extraordinary abundance of goods.

“It’s not that the system is broken. [Warehouses] are just totally, totally outdated, ”says Zac Rogers, assistant professor of supply chain management at Colorado State University.

Warehouses have entered the pandemic already quite busy, with more than 90% of the space claimed. Then the closures started in factories, ports and stores. People cut back on their purchases and things in the warehouses started to pile up. Then, when it all reopened, a pent-up influx of goods arrived.

“The warehouses were sort of full already and now they’re really, really full,” says Rogers. Its data shows that available warehouse space has been shrinking every month since last spring.

Meanwhile, shoppers have been spending at record highs, freeing up all the money saved by not traveling or going out – and their pandemic anxiety locked in – to buy things. In an average year, online spending can increase by 10% to 15%. Last year it jumped over 40% and only continued to grow until 2021.

Retailers responded to the surge in demand by increasing imports to record levels. Companies rushed to import into the United States as much as they could, while they could – because they had seen what disruption to factories and ports can do. They started stocking things “just in case” buyers wanted them, rather than “just in time” for when a customer is likely to buy.

“Basically you kind of see that doomsday prep mentality in all of these companies where they’ve normally been as lean as they can get,” Rogers said.

Warehousing businesses have grown as fast as they can. In fact, it was the only type of commercial construction that exploded throughout the pandemic.

But setting up millions of square feet with treadmills, robots, and all the bells and whistles takes time. In addition, the main storage space is delicate and limited.

Previously, building a warehouse involved finding a cornfield in the suburbs or lining up with a freeway interchange, says Kiersey. Now it’s too far. Retailers want to get packages to their doors as quickly as possible, which means they have to scramble for storage in expensive and overcrowded urban and suburban areas.

Warehouse builders were figuring all this out when the pandemic buying boom upped the ante.

“So demand has collided with static supply,” Kiersey explains.

In the space of a year, warehouse rents in some markets have doubled. Brand new buildings that would normally sit vacant for months sell space before they are completed. The other day, Kiersey had to do something unheard of: turn down a former customer when three companies were fighting over the same warehouse.

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