When you place an order on an e-commerce website, your main concerns are likely the cost and speed of shipping. Most of us never give a second thought to where those items are stored and how they actually make their way to our front doors. But according to a recent report from CBRE, we might need to start paying attention. Evidently, most of the nation’s existing warehouses are several decades old — and they’re unable to handle our obsession with online shopping.
According to the report, the U.S. is in dire need of more modern warehouses. Even though 1 billion square feet of modern warehouse space has been built in the last decade, that accounts for only 11% of the nation’s total warehouse inventory. The warehouses built after 2008 represent only 4% of all warehouse buildings; these structures are around three times larger than warehouses from decades past. The rest of the structures are much older, with an average age of 34 years and a lot less space to offer. In addition, 1 billion square feet of existing warehouse inventory space is 50 years old with clear heights of less than 20 feet.
These smaller, older warehouses simply can’t accommodate the needs of American consumers. When CBRE analyzed data from 56 major U.S. markets, they found that facilities built before the mid-2000s pose major problems for the nation’s growing needs. For example, their small footprints, uneven floors, lack of docking, and low ceilings make it difficult to put these warehouses to good use. Although iBenchmarking Warehouse Performance estimates that less than 30% of warehouses are efficient, it’s possible that number could be higher when examined through a modern e-commerce lens.
With more companies offering speedy delivery and more Americans placing an abundance of orders, developers are eager to built warehouses in areas with larger populations. However, land in these areas is harder to come by — due to both lack of availability and lack of funds — which makes it difficult for developers to actually build. Even keeping the average warehouse building age at a constant is a near-impossible task. To do that, around 275 million square feet of warehouse and distribution center space would need to be built on a yearly basis. But actual construction has averaged out at 100 million square feet every year for the past 10 years. Although the construction industry eliminated 40% of its work force between 2006 and 2011, labor shortages aren’t always the problem here; it’s finding available, affordable land in key areas of the country.
The CBRE report suggests that the markets with the newest warehouses — like regions in California, Las Vegas, Atlanta, and Phoenix — are the best places to build new facilities. They tend to have more developable land and are located in major population areas.
In the report, the agency noted: “Given the low share of modern warehouse space and the rise of e-commerce, there’s ample opportunity to develop new warehouses and rebuild physically obsolete ones in the best infill locations.”