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Another Supply Chain Issue: Lack of Warehouse Space

A new Wall Street Journal article makes clear that there is another supply chain issue on the horizon, amid worsening delays and disruptions in a variety of aspects of the supply chain. The issue is lack of warehouse space for businesses, and it could have a huge effect on the supply chain if this lack of space continues.

Real estate firms have released new data which question whether there will be enough warehouse space to complete the normal supply chain fulfillment operations and quick delivery times that consumers and businesses have become accustomed to. In Q3 2021, for example, real estate firms report record low warehouse availability in the U.S. There was a supply deficiency of 41 million square feet of warehouse space when compared to demand for space during that same time period.

Additionally, the vacancy rate fell to 3.6%, compared to 4.3% during Q3 of 2020. CBRE Group finds that the vacancy rate is at the lowest figure since 2002, nearly twenty years ago. Of course, the problem is even worse near the nation’s largest port complex of the Ports of Los Angeles and Long Beach in California. There, the vacancy rate is as low as 1%, compared to over 2% last year. While that may not seem like a big difference, given all of the delays, disruptions, and mayhem of the past few months, that lower vacancy rate is just another element in a perfect storm of trouble for shipping.

At the same time, real estate firms also warn that rates for warehouse space are increasing, too.

Real estate firm Cushman & Wakefield has released new numbers that confirm asking rents are up big for commercial industrial space. Rates for industrial space climbed over 8% in Q3 2021, not making things easier for businesses. The average price per square foot is now over $7.00. There are some asking rates as high as $9.00 per square foot.

Of course, this is a terrible time for the rates in industrial spaces to rise, since brands are desperate to conquer some of the supply chain issues they’ve faced. If businesses are able to get goods into the U.S. from overseas despite the container shortages, yet cannot store these goods before they are shipped to customers, this creates further bottlenecks in the supply chain. At this point, U.S. consumers should get used to lower expectations for the Christmas season, as there will definitely be delivery time issues and shortages of goods, as the supply chain does not recover fast enough.

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