It’s difficult to overstate the effect that COVID-19 had on the current warehouse market. Companies learned the hard way that Just-In-Time models and lean inventory were risky in case of emergency.
Today, safer real estate trends dominate the way retailers and companies handle their warehousing. Here are some of the top trends of 2021 for warehouse real estate.
The most significant change in warehousing trends for 2021 is the increase in inventory. The drive to increase inventory space is due to two main factors. The first factor is the considerable increase in eCommerce. The demand for shopping online has created bigger online and drop shipping businesses than ever.
The second factor in increasing inventory size is due to an abundance of caution after the struggle of businesses to remain open during COVID. Many companies could not get shipping from their manufacturers due to supply chain delays. Because of both of these factors, the average Distribution Center now carries up to four times more inventory. Warehouses are more in demand and need more space than ever.
The increase in inventory is not limited to B2C warehouses. In B2B, companies are increasing their inventory of three items in particular:
- Crucial parts
- Long lead time parts
- Single/sole sourced parts
By having parts in reserve, the businesses can ensure they do not run out of these parts and production doesn’t halt. For them, the cost of inventory outweighs lost sales due to an emergency.
The increase in inventory means that warehouses and distribution centers need to be bigger. To save on costs and real estate, warehouses are looking “up” for increasing their square footage.
Taller warehouses and distribution buildings are becoming the norm. They can have more space for storage without needing to purchase more land. In fact, 40 feet tall buildings are now becoming standard for maximizing storage.
The effect that retailers and manufacturers have on the environment has not gone unnoticed by customers. Plus, the cost of energy can be a significant drain on businesses. As a result, modern warehouses are looking to become greener with better energy-efficient practices.
“Green warehousing” uses energy-efficient practices like solar panels, LED lights, and green building materials for more Earth-conscious designs. Also, some warehouses are required to have more environmentally friendly practices. For example, skylights are legally required in California to cut down on daytime light use.
The past year taught many retailers that the market is hard to predict. While some companies struggled hard in the face of a pandemic, others could barely keep up with an explosion of growth. Neither one knew at the beginning of 2020 how things would change. Now, businesses want flexibility in their warehouse needs to match this unpredictability.
On-demand warehousing enables businesses to increase their storage capacity without commitment. The pay-as-you-go model allows them to take up more space in the short term or shrink if the market changes. Similar to an Airbnb model, companies can have less commitment to their warehouse space.
The New Warehouse for 2021
As buyer habits change, warehouse real estate will shift as well. The past year saw an explosion of eCommerce and an unpredictable market. The real estate trends enable retailers to grow their business in safer ways by increasing inventory and allowing short-term renting instead of rigid contracts.