Warehouse Space Continues To Be in Short Supply, an Effect of Urbanization

e-commerce companies struggle with wasted warehouse space

ecommerce warehousing space has always been valuablen the e-commerce warehouses and distribution centers, space has always been a valuable resource, and it’s becoming even more so today. The demand for warehouse space in the United States exceeds what is available  a trend that’s likely to continue. Only 7 percent of U.S. warehouse and distribution real estate was vacant last year, hitting a 14-year low. 

High Cost of Warehouse Space

E-commerce is growing rapidly, making floor space and work space in warehouses a premium,” says Ryan Roberts, Product Care global executive marketing director at Sealed Air Corporation. “More space allows retailers and e-commerce companies to stock more products, add packing lines, make handling more efficient, and improve worker safety.” 

In fact, 24 percent of customers have said they would be more likely to buy online if a retailer offered next-day delivery, and 8 percent said likewise about same-day delivery. “The typical customer now expects their orders to be fulfilled in two days or less,” Roberts says. “That means being where your customers are — in or near major cities.”

Today, more than half of all people in the world live in urban areas, and that proportion is expected to increase over the next few decades. One of the problems with that urbanization for businesses is limited logistics and supply chain resources in and near these major markets. Los Angeles, Long Island, and Denver have some of lowest warehouse vacancy rates in the nation. Today, consumers are less willing to wait for their orders to be delivered.

E-commerce businesses need to leverage innovations to save costs

Because of that insatiable demand, global warehouse rents have risen more than 20 percent since 2012  and that’s not even factoring in the rising labor and energy costs required to operate those warehouses.   

One way e-commerce companies are doing this is by taking a cue from the on-demand psychology that is driving their consumer behavior today. They are identifying ways to create packing materials on-demand — where and when they need them — without taking up valuable warehouse space. “Companies need to optimize the warehouse space they already have,” explains Roberts. “Businesses need to leverage innovations that will allow them to keep up with the requirements of their lines and give them large pockets of warehouse space back. We need to take out the pieces of the equation that aren’t necessary  based on resource preservation.”

To learn more about how leveraging an on-demand mentality can help optimize your business supply chain, read “Urbanization: Why Every Business Needs to Start Thinking On Demand.”

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