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  • Writer's pictureClearFreight

Warehouse Crunch and Supply Chain Disruption: What Happens When We Run Out of Space?

The global supply chain has been experiencing a lot of disruption as a result of the COVID-19 pandemic as countries and corporations around the world respond to this new threat. Warehouse crews were scaled back to allow for social distancing while panic buying resulted in the emptying of store shelves across the United States.

COVID-19 has had a number of impact on the entire logistics and supply chain world with recent changes continuing to ripple across industries. Many goods producers have shifted from leaner just-in-time (JIT) inventory systems in favor of stocking up on raw materials to help mitigate the impact that future supply chain disruptions may have as the world continues to deal with the current global health crisis.

More Warehouse Space Required Due to Ongoing Coronavirus Pandemic

As more organizations prepare for the possibility of a second wave of the coronavirus pandemic and the impact it may have on the global supply chain, more warehouse space is required to accommodate the increase in stockpiling. The world of e-commerce continues to heat up as a result of COVID-19 purchasing trends, placing additional stress on supply chains and warehouses to keep up with demand.

According to real estate services firm JLL, “... e-commerce sales could hit $1.5 trillion by 2025 — which would increase the demand for industrial real estate to an additional 1 billion square feet.” E-commerce places a larger emphasis on having a distribution chain that has warehouse locations spread out across the country to cut down on fulfillment times.

This increase in warehouse real estate demand comes with a precipitous drop in brick-and-mortar retail performance. With stores shutting down as more people move to online purchasing, more warehouse space is needed for products that were previously stored and sold in physical stores.

Looking Forward

Increased demand for warehouse space is expected to continue for at least the next five years as more shoppers turn to online retail services. The transition to online shopping has been in the works for some time now, but the recent pandemic has resulted in unexpected surges that stepped up the timeline.

Retail real estate values are dropping as demand increases for warehouse space. New warehouses will need to be built while other commercial real estate structures like malls are repurposed for a more immediate solution to the new storage problem. These changes will not happen overnight, but they are already in the works as organizations adjust to the new normal.

Contact us today and see how one of our logistics and supply chain experts can help your business adapt to the new norm.

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