Now may be a better time than ever for beneficial cargo owners (BCOs) to consider expanding their warehouse locations.
Whether renting or buying, costs may be leveling out as 2019 soon comes to a close.
One of the main concerns for BCOs and logistics providers is the ever-rising cost of warehouse rent. According to a recent article on JOC.com, “Most North American industrial real estate markets have experienced at least a 25 percent increase in rental rates since 2010,” including both inland hubs such as Tacoma, Washington and Chicago, Illinois, and the more coveted seaport locations like the Port of Los Angeles-Long Beach. Fortunately, there is finally light at the end of the tunnel – this enormous, nearly decade-long steady increase may finally be tempering out.
The same JOC article notes that the supply of warehouse locations is increasing slightly faster than demand, therefore resulting in a leveling out of rent costs.
The current percentage of warehouse availability in larger port cities such as New York and New Jersey on the east coast and Oakland and Los Angeles-Long Beach on the west coast are in the single digits. These meek availability percentages are to blame for the consistently increasing rent. Smaller port cities like Charleston, South Carolina, Savannah, Georgia, and Jacksonville, Florida boast higher availability, thus allowing more landlord leverage, but the rent costs in these areas have also been on a steady incline.
However, with the supply increasing more quickly than demand, along with other factors such as “the scarcity of skilled truck drivers driving growth in markets served by intermodal rail,” rent rates are finally leveling out. Although the leveling out of rent costs does not mean that they will falter or decrease by any means, it still comes as great news for BCOs looking to expand their supply chain.
Before moving to expand, be sure to consider the many complexities involved in finding the perfect warehouse location.
Aside from rent costs, there are many other factors to be consider when choosing the optimal warehouse location. Direct links to seaports and airports may seem like an obvious choice, but they may not always be cost-effective or convenient in terms of connection to customers, manufacturers, or other third parties. It may be more cost-effective and efficient to locate a warehouse closer to a railroad than to a seaport, or closer to an inland location with a higher percentage of capable truckers than directly near an airport. Furthermore, depending on the size of the facility, it is necessary to ensure there is a strong workforce available in the region to meet daily labor needs.