If you are in logistics, you have been hearing about the trend toward more warehouses being built, and a trend toward smaller warehouses being built in urban areas. This is being driven, the popular wisdom goes, by the rapid ecommerce growth rate and increased competition among retailers to get their goods to consumers more quickly.
But how much has warehousing grown? The reporting I’ve seen does not quantify this. It turns out a real estate services and property investment strategies company called JLL does. These trends, according to their data, are not particularly real.
Let’s look at the data on total warehousing space by year:
- In 2010 there was 12.0 billion square feet
- In 2015 it had grown to 12.4 billion square feet
- And by 2020 it had grown to 13.6 billion square feet.
The compound annual growth rate (CAGR) from 2010 to 2020 is only 1.3%; from 2015 to 2020 the CAGR is 1.8%. Because of the pandemic, the US economy grew 2015 to 2020, using second quarter GDP data, by only a 1.4% CAGR. So, warehousing space is growing faster than the economy, but not by that much, and certainly not fast enough for me to call it a significant trend.
Let’s now look at JLL’s data on the total number of warehouses:
- 2010: 180,071
- 2015: 183,259
- 2020: 188,458
In terms of the number of warehouses, the 2010 to 2020 CAGR is only 0.5%. And the CAGR from 2015-2020 has grown only slightly to 0.6%. Both periods had growth at well less than the rate at which the economy has grown. So, in relative terms – in economically normalized terms, this is negative growth.
Finally, let us look at what JLL says the average size of a warehouse today is versus five and ten years ago:
- 2010: 138,266 square feet
- 2015: 201,996 square feet
- 2020: 218,281 square feet
The popular wisdom is that we are building more warehouses, but they are smaller and located in urban areas. From 2010 to 2020, the size of the average warehouse grew by almost 60 percent. If we take the last five years, the size of the typical warehouse grew by 8 percent.
This is by far the best warehouse real estate data I have seen (and I’ve been looking). But Mehtab Randhawa, the director of industrial research at JLL, admits it is not perfect. They are covering 55 markets – regions like Atlanta or Eastern and Central Pennsylvania or West Michigan. But as I looked over the markets, I did not see lightly populated real estate markets like Montana.
Further, they don’t track every warehouse coming online if it is less than 30,000 square feet. In some cases, they do track a 10,000 square foot warehouse, but this is more the exception than the rule. Finally, dark stores, stores turned into warehouses for ecommerce deliveries, are very hard for them to track.
So, it is not perfect data. But it is very good and comprehensive data. And I’m doubtful that it would change the analysis all that much even if they were able to track smaller markets and more warehouses under 30,000 square feet. Afterall, we are talking about 13.6 billion square feet of warehousing. How much would these rather small holes in their coverage really change things?
I was delighted to make the acquaintance of Ms. Randhawa of JLL. I’m just nerdy enough that I was really excited by this data. I’ll be calling on these folks more in the future as I write about warehouse “trends”.
