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Warehouse Construction On Course To Boom In 2018

January 10 2018

Construction ,
News ,

In 2017, I wrote about how the rise of e-commerce caused a rise in wages for warehouse positions. But the slow decline of brick-and-mortar retail in favor of online shopping is boosting another industry, too. Warehouse construction.

Warehouse Boom

Moody Analytics predicts that internet retailers are going to need even more industrial space for their fulfillment operations than they do now. Specifically, the firm is predicting that the year-over-year annual growth rate in warehouse space will be 9.8% by 2019. This is more than twice the growth rate predicted for office space.

Dodge Data & Analytics concurs. According to the firm, “warehouse construction is supported by greater demand arising from e-commerce. [Meanwhile] store construction will remain weak.”

Land Grab

The increased demand for new distribution and fulfillment centers is also pushing the price of land higher.

Commercial real estate service CBRE analyzed this trend. In hot distribution markets like Atlanta and Houston, the average price for “large industrial parcels” went up from $50,000 to $100,000 per acre in just one year.

Typically, distribution and “last mile” delivery centers require an industrial plot of between 5 and 10 acres.

Not Enough Warehouse Space

The 2018 forecast for construction across all industries looks strong, with many analysts predicting growth. But despite this, the demand for more e-commerce warehouse space continues to outstrip supply.

“Escalating land prices are a big reason why new supply of U.S. warehouses and distribution centers hasn’t kept pace with strong demand in recent years,” said David Egan, the global head of CBRE’s Industrial & Logistics Research division.

Unstoppable Amazon

E-commerce juggernaut Amazon continues to build warehouses. The company plans to grow its workforce significantly in 2018, adding 100,000 workers. This will bring its workforce to 280,000 by mid-year.

As of August 2017, Amazon was estimated to have 296 active facilities in the U.S., with a total of 99.6 million square feet of industrial space. At that time, the company had plans to add another 60 facilities. This equates to an additional 38.8 million square feet of industrial space.

As of December 2017, Amazon announced plans to build the following new fulfillment centers:

Announced in September 2017