Why Warehouses Are Taking Over The U.S.

Summary

The US economy's growth is fueling a demand for warehouse space, with an estimated 1 billion square feet needed by 2025. The Lehigh Valley in Pennsylvania exemplifies this trend, becoming a warehouse hotspot due to its strategic location and proximity to consumers. However, this rapid expansion is causing controversy among locals who fear the loss of farmland and open spaces. Warehouses support the e-commerce boom and faster deliveries, but the industry is sold out, leading to a shortage of space and rising rents. The situation highlights the ongoing tension between economic development and community values.

Takeaways

• 🏗️ The US will need an additional 1 billion square feet of industrial space by 2025 to meet demand, driven largely by e-commerce and logistics needs.
• 📉 The rapid increase in warehouse development is creating backlash in communities, particularly in regions like the Lehigh Valley, Pennsylvania, where people are concerned about losing farmland and open spaces.
• 🏘️ The Lehigh Valley has become a hotspot for warehouse construction due to its central location near major highways, ports, and airports, allowing easy access to large population centers.
• 🏭 Dutch Springs, a popular recreation area, will soon be transformed into two warehouses, marking a significant change for the land and the local community.
• 💰 Warehouse development is highly profitable, with land values rising rapidly, leading to opportunities for property owners to retire by selling their land to developers.
• 🔑 The surge in warehousing is closely tied to the growing demand for faster deliveries and the expansion of e-commerce, which requires much more space than traditional retail.
• 📦 The US currently has about 11,000 warehouses, with millions of square feet under construction, as developers try to keep up with unprecedented demand.
• 🚚 Warehouses are a key part of the logistics chain, moving goods from production to consumers. Companies like Amazon, UPS, and FedEx are major tenants.
• 🌍 The Lehigh Valley’s strategic location along the East Coast has attracted significant investment, contributing to the local economy, which hit a GDP record of $43.3 billion pre-pandemic.
• 📈 Warehouse vacancy rates are at historic lows, with many buildings fully leased before construction is completed, driving up rents and demand for more space.

Q & A

What is the estimated amount of new industrial space needed by the US by 2025?

The US will need 1 billion square feet of new industrial space by 2025 to keep up with demand.

What is the current status of the land where Dutch Springs Aqua Park is located?

The land at Dutch Springs Aqua Park is planned to be transformed into warehouses.

What is the impact of the warehouse expansion on local economies like the Lehigh Valley in Pennsylvania?

The expansion is shifting local economies, making commercial and industrial real estate markets particularly red hot in areas like the Lehigh Valley.

How has the rapid growth of warehouses in the Lehigh Valley affected the community sentiment?

The rapid growth has created a backlash, with locals upset about the loss of farmland and open space to warehouses.

What is the role of warehouses in supporting the online shopping boom?

Warehouses support the online shopping boom and the push for faster deliveries by providing the necessary storage and distribution space.

What is the current state of the warehouse industry in terms of space availability?

The industry is effectively sold out through the end of next year, with a shortage of space even if someone wanted it immediately.

How many warehouses are there in North America, and how much space is under construction?

As of 2020, there are about 11,000 existing warehouses in North America, totaling over 4.7 billion square feet, with nearly 190 million square feet under construction.

What factors contribute to the Lehigh Valley being a prime location for warehouses?

The Lehigh Valley's central location along the East Coast, close to major ports, highways, railroads, and international airports, makes it an attractive location for warehouses.

What is the significance of the land sale for Dutch Springs to its owners, Stuart and Jane Schooley?

The land sale provides Stuart and Jane Schooley with the opportunity to retire, as the value of their land has increased significantly over time.

What is the controversy surrounding the continued warehouse development in the Lehigh Valley?

The controversy arises from the conversion of land, such as the Dutch Springs quarry and diving opportunities, into warehouses, which some community members wish to preserve.

How does the growth of the warehouse industry affect the local workforce and economy?

The growth of the warehouse industry in the Lehigh Valley is expected to increase the local workforce by 13.4% over the next decade, translating to good job opportunities and economic activity.

What are the driving forces behind the need for more warehousing space in the US?

The need for more warehousing space is driven by logistics and distribution, third-party logistics, e-commerce, and retailers securing more storage to mitigate future supply chain shocks.