Home News America’s biggest warehouse is running out of room — it’s about to get worse

America’s biggest warehouse is running out of room — it’s about to get worse

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SAN BERNARDINO, Calif., Aug. 2 – A major U.S. retailer warns that sales of clothing, electronics, furniture and other goods crammed into its distribution center east of Los Angeles are slowing. Inside, the US’s largest warehouse market is full.

Goods continue to flood across the Pacific, and things are about to get worse in one of the busiest warehouse complexes in the United States.

Experts say that if businesses were caught ordering panicked goods to keep shelves full while goods from Asia were still arriving and were caught in a drop in demand, the U.S. supply chain would become a “bullwhip.” It warns that it will be hit by “effects”.

That moment seems to have arrived in America’s largest warehouse and distribution market, which stretches east of Los Angeles in an area known as the “Inland Empire.”

The sprawling warehouses of the Inland Empire, centered in California, grew rapidly to handle surging demand and goods imported from Asia.
Reuters/Lisa Bertline

“We feel the pain like a whip,” said Alan Amling, a supply chain professor at the University of Tennessee.

The Inland Empire’s sprawling warehouses, centered in Riverside and San Bernardino counties, have grown rapidly in recent years to handle surging demand and imports from Asia.

Visible from space, its burgeoning area underpins an industrial corridor containing 1.6 billion square feet of storage space that stretches from the busiest US port in Los Angeles to near the border of Arizona and Nevada. That’s about 44 times the size of the city’s Central Park and 160 times the size of Tesla’s new Gigafactory in Texas, TSLA.O.

warehouses are under attack "whip effect" Due to ongoing supply chain issues.
Due to ongoing supply chain issues, warehouses are beginning to suffer from the ‘bullwhip effect’.
Reuters/Lisa Bertline

But now, declining consumer spending is flooding warehouses here and across the country with more goods than they can handle, exacerbating the supply chain disruptions that sparked inflation. Left unneeded, retailers are faced with a choice: pay more to store them, or sell them at a discount and reduce their profits.

According to real estate services firm Cushman & Wakefield, Inland Empire’s warehouse vacancy rate is the lowest in the nation, at a record 0.6% compared to the national average of 3.1%.

The market is poised to tighten further as shoppers at retailers like Walmart WMT.N and Best Buy BBY.N retreat from their early coronavirus-era binge eating.

binge to backlog

U.S. consumer spending is still above pre-pandemic levels, but retailers and suppliers have warned about backlogs of obsolete categories as consumers catch up on travel and struggle with the highest inflation in 40 years. I’m ringing the alarm bells.

Last week, Walmart said higher food and fuel prices were causing low-income customers to spend less cash on goods, while Best Buy curbed shoppers’ spending on discretionary items like computers and TVs. said it does. These caution signals followed Target’s TGT.N warning of too many televisions, kitchen appliances, furniture and clothing.

Suppliers ranging from barbecue grill maker Weber WEBR.N to Helen of Troy HELE.O, a conglomerate of consumer brands that includes OXO Kitchen Tools, also warn of slowing demand and the urgent need to clear stocks. is doing.

Commodities continued to flow in near record levels during the downward shift in the US economy.

Imports into U.S. container ports handling retail goods from China and other countries surged more than 26% from pre-pandemic levels in the first half of 2022, according to Descartes Datamine. Christmas shipments and the reopening of major factory hubs in China could further boost sales volumes.

Meanwhile, cargo continues to flood the US’s busiest port complex in Los Angeles/Long Beach. In the first half of this year, dockers there handled about 550,000 more 40-foot containers than before the pandemic began, according to port data.

Scrutinizing ocean freight bills, Ocean Audit CEO Steve Ferreira said he’d stocked up on Christmas toys and winter holidays in July, along with Walmart patio furniture and Target stretch pants, jeans, and shoes. decorations have arrived at these docks.

Retailers have placed orders for most of these items months in advance, and many will be sent to Inland Empire’s already packed warehouses.

“It’s a domino effect. Right now, inventory is really piling up,” said Scott Weiss, vice president of Performance Team, a Maersk MAERSKb.CO company with 22 warehouses near Los Angeles.

Demand for space in the Inland Empire is so strong that when 100,000 to 200,000 square feet of space is freed up, it “would be swallowed up in an instant,” says Weiss.

sears and parking

Investors own nearly 40 million square feet under construction at Inland Empire (including Amazon.com Inc’s largest warehouse in AMZN.O history), with at least 38% spoken, Newmark’s Southern California said Dain Fedora, vice president of research at . Commercial real estate advisory firm.

Amazon’s 4.1 million-square-foot facility was built on a former dairy farm in Ontario, but the online retailer has shelved plans to build it in other parts of the country.

Amazon is the Inland Empire and the nation’s largest warehouse tenant. The company’s decision to scale back construction, coupled with rising interest rates and a slowing economy, has put other Inland Empire warehouse builders on the sidelines, local real estate brokers and economists told Reuters.

CEO Brad Wright is working with everyone from state officials to vacant store owners to find new locations to store their goods.
CEO Brad Wright is working with everyone from state officials to vacant store owners to find new locations to store their goods.
Reuters

Meanwhile, the scramble for space continues.

With local shipping company yards and spare lots already converted into makeshift container storage, entrepreneurs are pitching empty stores as waiting warehouses of last resort.

Brad Wright, CEO of Chunker, which calls itself the AirBNB of warehouses, is working with everyone from state officials to vacant store owners to find new places to store their goods.

On a recent tour at the former Sears Anchor Store in San Bernardino’s Inland Center Mall, Wright and a potential tenant pondered how a forklift would navigate an abandoned space, while stumbling over a slumped ceiling tile, Past sagging wall panels, idle escalators. Wright sees empty stores as her one answer to relieving log jams.

“They’re sitting a lot and they’re in good places,” he said.

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