Warehouses Are Getting Bigger as eCommerce Expands

eCommerce’s sudden growth has driven an increase in warehouses’ size. The average size of warehouses in the country has increased to 184,693 square feet since 2007, with its average ceiling height reaching 32.3 feet.

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Jobs continue to grow as warehouses multiply in both size and number. And although the demand for new warehouses space decreased in the last quarter of 2016, experts suggest that the sizes of new warehouses may make up for the loss.

“It just takes more space to do that kind of work—more people, more machinery, and more racks for the actual stuff… It’s like entropy; it becomes more chaotic as things break apart,” David Egan, CBRE – Global Head of Industrial and Logistics Research

eCommerce companies not the only driver of leasing demands

The massive increase in warehouse size is not merely the effect of more goods on hand. According to Egan, expanding a warehouse involves a company’s cohesive commitment to further expand all aspects of the supply chain.

Egan further explained that warehouses had to expand to keep up with the increase of merchandises. Supply chain managers have to monitor the goods and regulate them as well since they are the ones who keep the flow in order.

Although the industrial vacancy rate saw a drop of 100 basis points from the first quarter of 2016, the industrial rental rate was 10 percent higher earlier in 2017. Those major factors combined with the current net absorption of at least 183 million square feet and expectations for even more warehouse demand is expected to remain stable in 2018.

There are some experts who are growing more concerned about the increasing demands for bigger warehouses. According to Colliers International’s industrial property report, eCommerce revenue is growing five times faster than traditional retail revenue. Changes in both eCommerce and logistics will also affect the real estate cycle in the future.