Making it as a 3PL in today’s world is not an easy job. It requires a lot of effort, commitment, and knowledge about the industry. This is why it is important to be aware of all the things going on in the fulfilment world – whether they are big or small.
One such thing is the ongoing warehouse space shortage. Any business that is looking to make their break in the logistics world should be aware that there is a warehouse space shortage going on all over the world right now, which means that any space that you do get will be expensive. For 3PLs, this a double-edged sword – the rise in costs of storage motivates businesses to entrust them with the logistics of their operations but it also means that 3PLs have to be smart about the warehouse space they have and utilise it properly. In short, in order to succeed, your warehouse should be optimised from top to bottom so that you don’t fall victim to the shortage!
For more information, refer to the statistics below because they will give you a better idea about how the warehouse space shortage could play into the overall trajectory of 3PL businesses, including yours.
General Warehouse Statistics
Warehouse statistics to warm you up for the real deal.
- Due to the boom in eCommerce, the number of warehouses all over the world is predicted to reach 180,000 by 2025 – maybe even more. This would be an increase of almost 30,000 warehouses from 2020, when it was recorded that there were 151,000 warehouses globally (Statista). This means that the demand for warehouse space is only going to increase in the future, as more and more businesses are added to the mix and have to invest in storage options. This is more than likely to boost up the prices of whatever warehouse space there is ultimately available.
- The size of the global warehousing and storage industry will reach US$ 654920 million by 2028, from US$ 528320 million in 2021, at a CAGR of percent during 2022-2028 (Absolute Reports). This shows that there is a lot of money and investment involved in this industry, and the stakes are high. If you get your warehouse space sorted before the market reaches its projected peak, you will be setting yourself up for indubitable success.
- 181,130 sq ft is considered the average size of warehouses (G2). Every year, this number is increasing as more businesses aspire to expand their warehouses. This is because the larger a warehouse is, the better storage facilities you can expect from it.
Warehouse Space Statistics
The warehouse space globally is going through a crisis of sorts. Here’s everything you need to know about it.
- In Jan 2022, CBRE reported the previous year i.e. 2021 to have produced a record demand for mega industrial facilities. According to the report, the demand for industrial buildings such as warehouses in 2021 surpassed 2020 totals (CBRE). The leasing transactions associated with industrial facilities in 2021 totals to 105.3 million sq. feet – which was above 2020’s total, and is reportedly the highest amount noted by the CBRE in this areas since 2017. There is more competition when it comes to buying industrial space, and as we move forward into 2022, it becomes clearer that this competition is only going to increase.
- Almost all industries in the US took part in some sort of industrial leasing in 2021. Out of these, the most transactions are done by the general retail and wholesale sector, closely followed by eCommerce only and food and beverage industries (CBRE). Yet, there was some transaction for almost all industries including third party logistics, automobile tires and parts, medical, manufacturing, and construction. This further shows the surge in the demand for industrial space.
- The warehouse vacancy rate in the USA is below 4%, which is a record low in the country’s history (GlobalNewsWire). Vacancy rate refers to the percentage of all available units in a rental property such as a warehouse – and with the vacancy rate in a globally influential market like the USA being at such a low level, there is much for logistics providers to worry about. 4% means there really is not much space in the USA to ensure a seamless warehousing process.
- The warehouse is not a USA problem – it is going on all over the world. The UK is also witnessing a supply of warehouse space, especially due to the sudden surge in logistics needs in 2021 (Independent). This has resulted in rents for logistic centres and warehouses rising by a 61% (Logistics Manager).
- The demand for logistics and industrial space in England has been severely underestimated in the relevant areas of policy planning (British Property Federation and Savills). In fact, the future demand for logistics space is likely to be 29% higher than past levels. This is problematic since 3.8 million people are employed in the logistics sector – if there is not enough space to give way to the seamless operation of the fulfilment process, the sector and the people who work within it, including 3PLs, cannot thrive. It is also noteworthy that the logistics sector in England accounts for 14% of the economic output in England, and hence warehouse shortage should be addressed properly within the logistics space.
- In some areas of the West Coast, storage rates have driven up from 10% to a whopping 50% (Ware2Go). This is only going to increase in upcoming months, making it more or less non-feasible for businesses to get their hands on a lot of storage space. This can have an adverse impact on the success of your business as it is more than likely to cause an overall increase in your costs.
- Industrial real estate demand is expected to increase by 850 million square feet to 14.8 billion square feet as soon as next year i.e. 2023. (Deloitte). These monumental figures are a cause for concern and without proper intervention, it isn’t completely out of the question that businesses may have to suffer in terms of storage due to this shortage.
- The rise in business inventories has led to an exponential growth in the ratio of eCommerce retail sales (Deloitte). With real business inventories resting at about 12%, eCommerce sales to retails sales has reached about USD 11 billion. This proves that there is a connection between inventory management and storage and the growth of eCommerce businesses. This means that the rise in eCommerce sales is expected to drive warehouse demand, perhaps even beyond a point where warehouse space will be readily available for business.
Third Party Logistics Statistics
For businesses that don’t want the headache of looking for warehouse space amidst a global shortage, third party logistics providers i.e. 3PLs are the best option:
- The global third party logistics industry is projected to reach $1,789.94 billion by 2027, which would make it’s CAGR value of 7.1% from 2020 to 2027 (Allied Market Research). Given these numbers, it can be understood that more and more businesses are shifting towards 3PL logistics. This makes sense considering the warehouse space shortage and the subsequent rise in prices – businesses are finding it more reasonable to shift to 3PL instead of having their own warehouses.
- Today, 90 percent of the 3PL market consists of Fortune 500s (PMS Newswire). This is a significant increase from the 46 percent Fortune 500s that worked with 3PLs in the past. Again, this proves that 3PLs are becoming the go-to choice for big companies, one of the reasons behind it being the warehouse shortage.
- According to 54 percent of companies, there has been no change in service quality with their outsourcing initiatives (PA Consulting). This represents the fact that 3PL services are more likely to be preferred since there is no difference between the services they provide and the services businesses are used to. As a result, 3PLs will be trusted even more and warehouse storage space can be catered to accordingly.
- 62 percent of companies will renegotiate their outsourcing contracts (BCG). On this basis, it can be observed that outsourced logistics are becoming the new norm, and will soon take over other forms of logistics services. 3PLs are just the right area to invest in right now, considering that they take a considerable chunk off of your shoulders and streamline the whole logistics process for you without you having to worry about factors such as the warehouse shortage.
- 80% of the warehouse activities are outsourced (G2). As compared to the 20% that remains in-house, the warehouse activities that are outsourced become more efficient and are streamlined in a much better way.
Warehouse Automation Statistics
Another thing that can help you get rid of the warehouse blues is warehouse automation. These statistics prove that warehouse automation is certainly something you should consider:
72% of businesses believe that a warehouse management system is the popular warehouse management software as of 2020 (G2). This shows that warehouse management systems are an integral part of the logistics journey for many businesses. If you consider the level of optimisation they provide to businesses, it makes sense that they are such an important part of so many strategies. With the help of an efficient warehouse management system, you can optimise your storage space in the best possible way.
The global warehouse automation market will surpass USD 30 billion by 2026 (G2). As more businesses develop in this direction, it can be assumed that existing warehouse space will be adequately optimised and we may even be able to see a decrease in the warehouse shortage based on this.
77% of organisations claim they are serious about utilising automated warehouse systems to maximise data-driven performance and boost efficiency within these fulfilment centres (G2). If things keep going this way, most businesses will be able to counter the problem of warehouse shortage and not suffer from the various issues that may come with it.
Remember:
Warehouse space shortage is a serious problem that cannot be fixed until it is tackled from the root. Essentially, there needs to be some policy changes in industrial and warehouse real estate, so that warehouse space cannot be hoarded and that all businesses get the chance to comfortably sort out their fulfilment and storage needs.
However, until the problem is fixed, businesses can work their way around it. One way is to hire 3PLs and get logistics services. This way, it is easier to save money and also to ensure that their logistics are being sorted out by the best of the best – people who actually experience in smoothing out the fulfilment procedure.
Another thing that can help businesses is warehouse optimisation with the help of a warehouse management system. Warehouse management systems like Canary7 are designed by 3PL professionals and have the primary goal of streamlining fulfilment activity in a way that saves space, cuts down costs, streamlines order management; all while not compromising on the speed and efficiency of your operations.
If you take these two hand in hand, you can avoid having to experience the warehouse shortage at least upfront, and can instead have a wonderful, error-free warehousing experience.
