How warehouses and industrial land continue to keep up with the world around them

Frequent supply chain disruption, merchandise shortages, freight delays and an “always on” approach to meeting consumer demand: it’s just another day in industrial. A sector full of sharp demands and a constant state of flux, trying to meet the latest needs of the moment.  

For some, that might mean working to mitigate labor or supply shortages, and for others, it means diving headfirst into expansion opportunities for a critical piece of supply chain infrastructure: the warehouse.

Almost all the goods we purchase spend at least some time in a warehouse during their lifecycle, so while it may seem like that big bulky mass of brick-and-mortar near the highway may not have that much relevance to your daily life – it is probably playing a much larger role than you realize.

What is the current outlook for warehouses and industrial land? And what changes or advancements are we seeing now and into the future for this sector as our love for e-commerce and delivery only continues to grow? We explore below.

Industrial and logistics have never seen an acceleration like the current environment

“The reality is the industrial and logistics asset class has been on an amazing run the past few years. You speak to anyone who's been in the industry, regardless of their career length, and they'll probably tell you they have never seen an acceleration like we are seeing right now.”
Jeff Miller, Senior Vice President, Head of Industrial, Oxford Properties Group

Pandemic-driven rises in desire for e-commerce and delivery, paired with transportation and supply issues and general consumer demands for closer to consumer logistics, have combined for a sector pushed to the brink, brimming to life, and shaping into a nearly half trillion-dollar global market.

“The pandemic has only grown the trend of investing more into industrial, based on new and evolving needs and challenges. I have never seen more investment activity and demand activity from investors trying to put money to work in the industrial asset class at any point in time in my career, I don't think that's going to stop, I think that there will be continued pressure.” 
Erik Foster, Head of Industrial Capital Markets, Avison Young

This pressure is what experts are seeing even as industrial land supply becomes increasingly scarce – a result of many trying to capitalize at once on current climates.

As demand begins to outpace supply of industrial land and labor, some are leaning on creative solutions to make ends meet, such as multistory warehouse offerings, robotics and automation.

With demand for warehouse space outpacing available land in many markets, it’s creating an interesting challenge and opportunity for industrial real estate owners who find themselves asking: when you can’t expand out, where else can you go but up?

Multistory warehouses have been popular in Asian markets for quite some time, decades even, but current trends have started to see them popping up in North American markets now too. Lease rates paired with lack of available land give justification to build these types of facilities. As well as give the asset class an opportunity to explore alternatives that give local markets options for how and where warehouses are located.

For those able to neatly make existing land work with their warehouse needs but find labor or efficiency shortages are costing them, some are turning to robots to close needs gaps. Yes, robots.

That warehouse down the street from you just might be completely automated, and you’d never know for sure unless you stepped inside.

Growth in the sector will continue to ebb and flow to meet the unique needs of individual markets and populations.

Whether single or multistory, run by humans or robots, or a hybrid combination of the two, most modern warehouses and projected options for future builds are keeping individual market needs in mind.

Data around purchasing, market size and make-ups, and so much more, are driving key decisions around current warehouse evolutions and new build projects (which are also seeing some of the longest construction lead times in history as cost and availability of materials remains complex).

Last mile focuses and micro-fulfillment needs are becoming increasingly important as delivery windows shorten to match modern consumer cravings. After all, when Amazon can get you items same day, it puts pressure on the whole supply chain system to get products to consumers at lightning speed as well.

Looking ahead: what we see holding true for warehouses for years to come

For the foreseeable future, we see many of these trends and challenges remaining for a sector being pushed to its limits from every angle.

Companies will be forced to look at the buildings, processes, and plans, and likely need to be just a little more creative and innovative to win the day.

Multistory and micro-fulfillment centers will continue to gain in popularity, many occupiers will begin to see where and how they can lean on robotics and automation to increase efficiency and keep up with demand, retailers will rethink the role of warehouses in their operations (considering them a key piece of their store’s multichannel offerings) and diversified investment across the sector will remain a hot ticket well into the future.

With so many cool things happening in and around these boxes, it’s likely we’ll all be thinking about them a bit differently from here on out – as critical pieces of real estate bringing goods that much closer, and that much faster, to the communities that need them.

This article shares key takeaways from Changing Places podcast episode The new warehouses: the sleeping giants of industrial land, which features expertise from Avison Young’s Erik Foster and Oxford Properties’ Jeff Miller. For more, take a listen now:

Have you noticed more warehouses popping up in your neighborhood? What do you think of multistory warehouse or warehouses run by robots? Share your thoughts after listening to the episode across social media platforms using the hashtag #ChangingPlacesPodcast.

Author: Rachel Kresge, Avison Young Global Content Development Manager