When it comes to warehousing relief in 2023, U.S. shippers should err on the side of caution.
Many anticipate that warehousing capacity will get tighter throughout the year – not more plentiful – even with the numerous distribution and warehousing construction projects that are currently underway, plus efforts to reduce inventories.
Warehousing Capacity
During the fourth quarter of 2022, warehousing demand continued to climb throughout the U.S., with no sign that demand would hinder anytime soon. As we enter into a new year, that demand is still continuing and causing capacity strains. And, that demand is creating increases in warehousing costs as demand is exceeding supply.
Furthermore, this demand is having warehouse operators and customers innovate as freight continues to pile up, filing up not just warehousing space but trailers and containers as well.
The main issue right now is capital costs for construction projects – the one-off costs related to the acquisition, construction, or improvement of fixed assets such as land or buildings.
As the Journal of Commerce reports, those costs, which are financed by third-party investors (ie. banks), are rising under the pressure from U.S. interest rates and inflation. Some experts expected warehousing rents to rise by more than 10 percent year-over-year in 2023.
U.S. Storage Costs
Additionally, U.S. storage costs rose 19.9 percent year-over-year in 2021, data from the Council of Supply Chain Management Professionals’ 2022 State of Logistics report.
While total inventory carrying costs rose 25.9 percent, which is higher than the 21.7 percent increase in transportation costs, per the report.
Of course, we can only speculate what may happen this year in regards to warehousing capacity, as we can’t see into the future.
But it’s evident that the trend of shippers needing to have their freight closer to their customers is not just based on a “pandemic-driven” thing and that warehousing relief this year may be hard to come by.
Looking Ahead
Should you have any questions regarding this and how it could impact your shipments, please reach out to our team today. Additionally, we have our weekly market updates that can provide you with relevant freight news, updates, developments across the industry, and more.