© Beata Becla| Dreamtime
Warehouse Construction Down 35%
Warehouse Construction Down 35%
Warehouse Construction Down 35%
Warehouse Construction Down 35%
Warehouse Construction Down 35%

Warehouse Construction Down 35%

April 21, 2023
Economic conditions, not demand is the cause of this according to a study from Interact Analysis.

As with many other sectors, the recent economic downturn has hit the warehouse construction sector hard. Updated research by Interact Analysis suggests that fulfillment center construction has suffered in particular.

This wasn't the case from 2020-2021 as there was an increase in the construction of fulfillment centers to cope with increased e-commerce demand. A large part of this was due to Amazon building new warehouses. 

But, as the trend towards e-commerce begins to slow down, the construction and building of new fulfillment centers has also dipped. In 2022, 4,000 fulfillment centers were added to the global building stock, but in 2023 this is forecast to decline to 2,000. Consequently, demand for end-to-end automation solutions will also decrease and the boom we saw during the COVID-19 pandemic will come to an end. Many companies are likely to focus on automating their existing assets rather than investing in new, larger projects.

Warehouse construction has also suffered from the effects of poor economic conditions across much of the globe, in particular rising interest rates. It is expected the U.S. will see a “meaningful” downturn within the next 12 to 18 months and, consequently, Interact Analysis forecasts a decline in the rate of warehouse construction in the coming years.

“It is important to realize the downturn in warehouse construction is not due to a lack of demand.," said Rueben Scriver, research manager at Interact Analysis, in a statement. "Rather, it is due to high interest rates and poor economic conditions. The slowdown in warehouse construction is likely to be short-lived as the demand for sites is still there. Rent prices are anticipated to increase in the mid-term and e-commerce will continue to drive demand over the long term."

Despite this, the growth in e-commerce since the pandemic is likely to dampen the shock to the warehouse construction sector. This is a lagging indicator, so a significant decrease is expected in 2H 2023 and 1H 2024. Overall, 6,700 warehouses will be added to the global building stock in 2023, a reduction of 35% compared with 2022, but still higher than pre-COVID levels. 

Overall, China and the US are leading the way in terms of warehouse construction. In 2022, the two countries combined accounted for 58% of total square footage added. The U.S.’s total warehousing stock increased by 6% over the year and China’s by 5%. The updated research shows that Japan and France registered the lowest growth in terms of additional warehouse square footage in 2022.

 With regard to automation,  the group said it expects to see a decrease in demand for end-to-end automation, by the end of 2022, 18% of all warehouses had some form of automation installed and this is set to increase to 26% by the end of 2027. Food & beverage warehouses, and parcel sectors report the highest levels of automation in their warehouses.

Latest from Warehousing

96378710 © Nattapong Boonchuenchom | Dreamstime.com
#146171327 © Kittipong Jirasukhanont| Dreamtime
Warehouse Market to Increase 24% By 2030
Warehouse Market to Increase 24% By 2030
Warehouse Market to Increase 24% By 2030
Warehouse Market to Increase 24% By 2030
Warehouse Market to Increase 24% By 2030