Labor, energy, e-commerce growth, and retail sales are core attributes that have historically driven warehouse pricing. Rising energy costs are currently one of the biggest challenges for warehouses. The U.S. average, according to the consumer price index (CPI), is up 8.7 percent year-over-year.
Average Hourly Earnings for All Employees, Warehousing and Transportation is up 5.5 percent year-over-year, respectively. From a sales perspective, e-commerce growth has normalized but still remains on an upward trajectory. January’s advanced retail sales were strong posting a 3 percent increase following two consecutive holiday months of decline.
The national industrial vacancy rate remains tight at 3.3 percent. Key port markets continue to remain at less than a 2.0 percent vacancy rate. Savannah and the Inland Empire lead all markets with the lowest vacancy rates at 0.7 and 1.0 percent, respectively.
Nationwide warehousing capacity continues to remain tight and warehouse pricing continues to increase, up 1.4 percent month-over-month and 10.6 percent year-over-year ending in January 2023.
All regions have seen steadily rising warehouse storage prices. The Midwest and South regions lead all regions with 15.7 and 11.7 percent increases year-over-year, respectively.
“Tight industrial real estate vacancy rates have driven up real estate costs in the key markets. As we have explored additional capacity, the price per sq ft has doubled over the past 2 years. These drivers will be heavily influencing storage rates heading into 2023”
“As we have continued to grow, technology has been a major challenge for us.”
“The labor market is still unpredictable. We have raised our pay rates to be equivalent to our competitors; however, the consistency and motivation has declined dramatically.”
“We are still feeling heavy after-effects of COVID-19 and its influence on the labor market. Less people are willing to work warehousing jobs as employers move to a work-from-home model which has created a strong demand for labor, driving prices up.”
The warehousing sector remains tight but there is positive news for the broader supply chain. The RSM’s Supply Chain Index indicates the supply chain is in a state of recovery posting the 6th consecutive month at the pre-pandemic level. RSM estimates that supply-chain disruptions contributed to about a third of inflation that occurred over the last 2.5 years.
The recent improvements to supply chain efficiency have been a key factor in the fall of goods inflation.
Seth T. Bacon, Director and Consumer Products Senior Analyst at RSM, joins our podcast, Supply Chain Unpacked, to discuss consumer spending and tips for middle market businesses in the year ahead.
January’s advanced retail sales data indicated a 3.0 percent month-over-month increase, a strong rebound from two straight holiday months of decline.
The Consumer Price Index for All Items increased 0.5 percent in January and 6.4 percent over the last 12 months. The Index for shelter was the largest contributor to the monthly all items increase. Food, gasoline, and natural gas also contributed.
The Index of consumer sentiment rose 1.5 index points in February, up 6 percent year-over-year. Higher prices and inflationary pressures still have consumers spending with caution. Consumer expectations were essentially unchanged in February, up 4.9 percent year-over-year.
The Warehouse Pricing Index (WPI) is powered by warehousing service fees across our global network for ambient warehousing. We’ve started by defining a baseline of 100 and looking at changes in costs relative to the average price of inventory services thereafter. Market insights are obtained through interviews with partners across our agile warehouse network.
Industrial real estate vacancy rate is the percentage of available industrial property, such as a warehouse or distribution center.
The Advance Monthly Sales for Retail and Food Services provides early estimates of monthly sales for companies in the retail trade and food services sectors.
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