50,000 New Warehouses Of >50,000 ft2 In Next Six Years

Rueben Scriven, senior analyst at Interact Analysis, discusses the findings of the upcoming version of the Warehouse Building Stock Database

Tell us about the building stock database – what does it cover?

It’s exactly what it sounds like: an extensive data set covering the global stock of warehouses (all those with a footprint of over 50,000 sq ft). It’s broken down by country, by vertical, and by facility type (e.g. fulfillment centers, distribution centers, and sortation centers). It’s a very granular multi-dimensional data set. I’m pretty excited about it because it really is a unique report on the market. As an example, we provide a forecast for the number of grocery fulfillment centers in Germany, as well as the number of general merchandise distribution centers in China. In addition to the number and square footage of the warehouse building stock, we also look at labor requirements in warehouses and the costs associated with the labor.

What is the outlook for warehousing over the next 5 years?

The sector is destined to see significant growth. There are currently approximately 163,000 warehouses above 50,000 sq ft) which is forecast to grow to 214,000 in 2027 – a huge increase. 45% of the warehouse building stock is currently located in China and the US.

What were the key highlights of the report?

I’d say it’s the magnitude of the projected growth in the warehouse sector. An increase of 50,000 warehouses over the next 6 years is huge. And the fact that 25% of warehouse space will be used for online fulfillment by 2027 points to the fact that e-commerce is here to stay; an established lifestyle.

You’ve made some big changes in this edition – what’s new?

Over the past few months, we’ve collected a lot of secondary data from government statistics agencies and market reports from real estate providers, as well as financial reports from end-users themselves, creating a huge bank of data that allows us to calibrate and refine our modelling in a much more fine-tuned way. We’ve also improved our geographical segmentation. Instead of the “rest of the world” region, which was what was left after we had focused on 32 specific countries, we now have rest of EMEA, rest of APAC, and rest of the Americas. This enables us to build a much clearer picture of the penetration of automation into warehousing in the different regions.

Which sub-segment of the warehouse market is the one to watch?

Direct-to-consumer fulfillment centers for online orders are the one to watch. They are growing very fast. They currently account for 11% of warehousing facilities, and 18% of square footage. We are forecasting these figures to increase to 18% and 25% respectively by 2027 as e-commerce continues to boom.

What’s the most interesting thing you’ve learned during your warehouse research?

It’s got to be the tight relationship between automation and labor costs. There is a strong positive correlation between labor costs and rates of automation. We’ve worked this out mathematically by calculating the average labor cost per square foot for an individual country and total investment per country in warehouse automation solutions. When we plot average labor spend and average automation spend for individual countries on a graph, we get a perfect linear relationship – a straight line. Basically, the cheaper the labor cost is, the higher the automation spend. This may seem obvious, but we were surprised how tight the correlation is.

There is a strong positive correlation between labor costs and rates of automation

What are the future changes you’re going to be making to the database?

Our new model allows us to break down rates of automation in warehouses by region and by vertical, clarifying what has hitherto been a hazy picture, enabling people to make much more informed assessments of facilities. We’re also focusing on labor in two respects – average employee costs per country – the variation from country to country can be huge – and numbers of employees.

In future editions of this report we will be drilling down further, analyzing labor in terms of job roles, and looking at individual warehouses in terms of how they actually operate. This data will be invaluable for automation vendors. Warehouses, for example, which employ large numbers of workers for picking functions would be a good target for vendors selling piece-picking robots. Our database will identify those facilities for them.

To continue the conversation about the Warehouse Building Stock Database, get in touch with Rueben direct: rueben.scriven@interactanalysis.com