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While some big-name retailers (cough, Walmart and Home Depot) are chartering their own ships to bypass global supply-chain disruptions, that’s clearly not an option for all companies.
Take Oak + Fort, for example. The Canadian apparel and lifestyle brand has, like most, struggled with everything from rising costs and weekly shipment delays due to the pandemic, to capacity constraints, and congestion at ports.
So in August, the company decided to outsource its US distribution to a third-party logistics company, NRI Distribution, in Fontana, California, just a two-hour drive from the port of Los Angeles.
“We had outgrown our previous facility and were holding goods in multiple locations,” Albert Sum, Oak + Fort’s director of supply chain, told Retail Brew.
Close to home: A number of companies prefer to keep their inventory near ports of entry like Los Angeles, Adam Petrillo, executive managing director in Newmark’s Industrial Advisory Group, told Retail Brew. But warehouse space in those areas is getting more expensive.
- First-year base rents for industrial spaces in California’s Inland Empire, for example, increased 24.1% YoY through May, the second highest growth rate for US regions, per CBRE. (Northern New Jersey topped the list with a 33.3% bump YoY.)
- Warehouse sizes range from 10,000 sq. ft. to 500,000 sq. ft. Rent growth for bulk warehouse space larger than 500,000 sq. ft. grew the most at 13.2%.
Supply-chain volatility is also ticking up demand for warehouse construction in many major port cities. As of Q1 2021, the warehouse construction pipeline as a percentage of inventory in Savannah, Georgia, Charleston, South Carolina, and Norfolk, Virginia, is up 12.6%, 7.5%, and 7.3%, respectively, per Newmark Research. Each of those markets respectively have 71.8 million, 45.3 million, and 63.8 million sq. ft. of warehouse space, as of May.
Zoom out: “Broadly speaking, the folks that are midstream in the supply chain are having to store more inventory closer to where it’s being sold, so in the future if their supply chains continue to be disrupted…they’re not going to be caught without enough inventory to support their demand,” Petrillo told us.—KM