Spurred by E-commerce giants like Amazon and eBay, warehouse and distribution center construction in the United States is poised for a big boom. But haven’t eBay and Amazon been around for a while? Aren’t there thousands of other companies that do online purchases and shipping? Why is the construction of warehouses only starting to really pick up now? Amazon and eBay are also the two main giants of the tech and online purchasing world. Amazon’s founder, Jeff Bezos, valued at 178.5 billion dollars at the time of writing. People have been shifting to online purchases more and more for over a decade now too, right? So why are these numerous warehouse projects poised for growth only now?
Read on for our list of why warehouse construction is experiencing immense growth, and what that growth looks like.
Why is warehouse construction getting so big?
COVID-19 played a big role
Although the pandemic is hopefully in its decline in the US, it only started in 2020. Many states have already eschewed stay-at-home and mask orders. For the most part, people are free in most places to congregate and do all the things they did pre-pandemic.
However, in the early days of the pandemic there wasn’t clinical data on this new disease, and states reactions were heavy-handed. Many places, notably Los Angeles, had stay-at-home orders. Many people, unsure of the effects of a new disease also stayed at home on their own. Well, people still need things whether they are at home or out and about, so they turned to online shopping and delivery. The result was an over 30% increase in online shopping in 2020, with another 14% increase in online shopping in 2021. Online sales in the US totaled nearly 800 billion in 2020, which was way up from the almost 600 billion total in 2019.
On top of the fact that people were often staying at home and didn’t know what to do, they had stimulus checks. This kept some people relatively comfortable. Many people were able to continue working remotely while receiving stimulus checks, meaning they were able to spend those checks on what they wanted, rather than necessities like rent and food.
The trend was going up for a long time
COVID-19 was certainly not the only reason for an upcoming boom in warehouse construction. Online purchases have been trending up in the US for over a decade. In 2010, the ecommerce industry in the US accounted for sales of 165.4 billion. By 2020, that number was up to nearly 800 billion, with some estimates putting sales at well past 800 billion dollars. The trend isn’t just in the US either, worldwide, sales went from 572 billion to 4.2 trillion in that same time.
The increase in online shopping comes from a variety of reasons:
Ease. It’s incredibly easy to buy even niche or specific parts online. All one has to do is put in a serial number or research a manufacturer and part.
Development. As the world becomes more connected with better data technology and logistics/supply chain tech, online retailers are getting better and better at what they do. On top of that, developing nations are seeing vast amounts of people who are able now shop online thanks to new connectivity. This is especially visible in nations such as China or India, which are still playing industrial catch-up with Western nations.
Online sellers are also preparing for an uncertain future
The global pandemic highlighted many of the weak spots in the economy. Face-to-face places, like bars, restaurants, theaters, and the like all suffered greatly. Shopping malls, which had already been feeling the squeeze from online purchase growth, bore much of the brunt of this.
But with the sudden increase in online purchasing came larger demands on the global economy. Like it or not, our world economy is just that: a world economy. Raw materials may be grown or mined in one country, sent halfway around the world for refining, and then constructed into a final product in yet another country. The pandemic showed the weaknesses of an over-stressed supply chain. Harmonizing the acquisition of billions of items with their delivery, and construction became much more difficult.
This has resulted in the present global supply chain slowdown. Shortages in products are coming from places with COVID-19 lockdowns, and the butterfly effect is causing havoc all over. From microchips to bicycle parts, ordering products online has become a roll of the dice. Will it arrive in a few days or a few months? Online retailers are trying to buffer for that by ensuring they have the stock to handle future supply chain problems. This involves having more warehouses full of product. Nobody knows whether a new pandemic, war, or natural disaster will disrupt the economy. All we can do is adapt and hope we are ready.
What does the increase in warehouse construction look like?
If you are a construction contractor, does this look like a good time to be in the business? Well, the answer is yes and no, although warehouses are poised for a massive uptick in construction, other businesses are going the opposite way. The decline of brick and mortar shops is the opposite side of the coin to online retail growth. Commercial contractors may get more work from building warehouses, but they aren’t about to be building tons of new shopping malls any time soon. According to Statista.com, To put it into perspective, online shopping was about 5.8% of US retail sales in 2013, as of 2022, it’s sitting at about 16.1%. That may not seem massive, but it is predicted to be almost 22% by 2025. And with no end in site, the majority of our sales may be online within our lifetimes.
Here are some stats on the current increase in warehouse building:
Nearly 96% of existing industrial warehouse space is presently in-use.
To keep up with demand, there may be another 1 billion square feet of new industrial space needed.
Nearly 190 million square feet were in construction in North America in 2020, with over 43% of those spaces pre-leased. (Pre-leasing is when the warehouses are leased before construction is complete)
In some places, the leasing volume is triple what is presently being built.
Source: CNBC.com
What this means for the future of the economy as a whole isn’t totally clear. But one thing is certain: online retail will only need more warehouse space in the future.
Build your warehouse with the experts
Reliable Commercial Construction has been building industrial spaces for over 35 years. We have experience building storage facilities, retail, and industrial structures of all time. If you are looking for trustworthy, experienced, and consummately professional commercial contractor, look no further. Contact us today for a free quote, and a head start on getting your warehouse project started.