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How large is the US warehouse industry and is it growing?
Hello! Thanks for your question about the US warehouse industry. The short version is that the US warehouse industry is worth $141 billion a year, accounts for 13.5 billion square feet of space and is predicted to grow at a CAGR of 6.93% between 2015 and 2019. Below you will find a deep dive of my findings.
METHODOLOGY
I conducted this research by consulting industry reports and drawing together information from them. I chiefly relied on recent commentaries from JLL, Cushman and Wakefield, Armstrong and Associates and IBISWorld. Please take a look at my findings below.
MARKET SIZE AND VALUE
In 2015, Armstrong and Associates, Inc. (A&A) estimated the total U.S. warehousing market at $141 billion.
IBISWorld's five warehouse industry subcategories revenues totals of $66.7 billion in 2016. The breakdown of these categories is as follows:
The total US warehouse industrial inventory stood at 13.5 billion square feet in 2016, of which 8.7 billion can be judged investment grade (of highest quality). This industrial market can be broken into six segments: Multi-tenant Distribution Warehouses, Bulk Distribution Warehouses, Owner/User Warehouses, Manufacturing, R&D/Flex, and others. Of these, Multi-tenant Distribution Warehouses are the dominant type, constituting approximately 40% of total square foot of the market with each warehouse typically around 200,000 square feet. Cushman and Wakefield research have predicted that it is this segment of the industry that will experience the greatest growth in future years.
The warehouse industry is dominated by a relatively small number of large companies at the top of each segment. In third party logistics, for example, DHL held almost twice the square foot measurement of its closest competitor (115 million vs 65 million) who in turn sat almost 30 million square feet ahead of the next largest company.
GROWTH RATE
The warehouse industry is in good health with strong growth prospects. Technavio have forecast strong growth for the 2015-2019 period with a predicted compound annual growth rate of 6.93%. The five key vendors identified in this growth are AmeriCold Logistics, CEVA Logistics, DHL, GENCO, and Kuehne + Nagel.
Drivers for growth are diverse. Ecommerce remains of significant importance with continued growth: according to the U.S. Department of Commerce, total ecommerce sales for 2015 were $341.8 billion, an increase of 14.6% from 2014. Ecommerce sales also accounted for 7.3% of total sales, compared to 6.4% in 2014, and are growing at a rate that is five times faster than overall retail sales. Warehouse growth also relates to economic performance and will continue to benefit from recent positive signs in this realm: in 2015, 2.78 million jobs were created, the second highest total since 1999. Job openings, typically a leading indicator of future hiring, rose to a 15-year high. Both wage and total compensation growth, as measured by the Employment Cost Indices, rose by over 2% in 2015 – the first time since 2008 that both indices grew faster than 2% at the same time.
In geographic terms, the warehouse market is concentrated in five regional markets accounting for 38% of total absorption activity in the first quarter of 2016: Atlanta (5.3 million square feet of net ocupancy gains), Chicago (5.2 million square feet), Inland Empire (3.6 million square feet), Dallas/Fort Worth (2.2 million square feet) and Central Pennsylvania (2.2 million square feet). Active construction in these markets also represented 48% of the nation's total, at 85.7 million of 178.4 million square feet of active construction across the 51 states. Growth nevertheless remains a consistent characteristic across the national market.
DEMAND
Demand for warehouse facilities in the US is high, reflecting the strength of the market as a whole. A report by JLL in the first quarter of 2016 showed the vacancy rate in US warehouses to be at a 16-year low, at 6.4% of total space. Nearly half of those warehouses which remained unoccupied were mid-1980s vintage product or older, illustrating the high demand for - and corresponding extremely low vacancy rates of - large modern constructions. Net absorption was positive for the six years 2010-2016, reflecting that demand continues to outstrip new warehouse constructions entering the market. It is expected that in future years construction and absorption will continue at their present high rates.
To wrap it up, the US warehouse industry is worth $141 billion a year, accounts for 13.5 billion square feet of space and is predicted to grow at a CAGR of 6.93% between 2015 and 201, providing a promising investment opportunity. Thanks for using Wonder! Please let us know if we can help with anything else!"