More warehousing needed as firms raise inventory

28 May 2020

A new trend in the wake of the coronavirus pandemic for companies to keep inventories close to hand could drive an increase in demand for warehouse space.

The CBRE report said as the US economy restarts business supply chains will develop to reflect new realities.

“The downward trend in inventory-to-sales ratios since the early 1990s could reverse as manufacturers, wholesalers and retailers store materials and products closer to manufacturing centres and consumers,” said the report.

The report predicted domestic supply chains may receive a boost as companies re-shore or near-shore production.

CBRE Research said that a 5% increase in business inventories would require an additional 400m-500m sq ft of warehouse space.

As areas with convenient access to seaports may offer limited space, this would benefit inland hubs including those in Atlanta, Memphis, Greenville and California’s Central Valley.

The likelihood that consumers will continue social distancing even as economies reopen means growing e-commerce is likely to create additional warehouse demand.

“Established e-commerce hubs at major transportation centres should see strong fundamentals as many occupiers recalibrate their supply chains and build automation and efficiencies into their distribution networks,” said the report.

“The Covid-19 crisis has underscored the fragility of just-in-time (JIT) production networks,” said the report.

“These JIT systems are now susceptible to closed manufacturing facilities, ports and borders due to the Covid-19 crisis.”

A March survey by the Institute for Supply Management found nearly 75% of respondents had experienced supply chain disruptions and more than 80% believed they were likely to do so in the future. This was likely to lead to major restructuring of supply chain processes.

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