The Planets Align for Warehouse Automation

While the global economic downturn over the past few years has put the squeeze on business expansion, several success stories have managed to take shape. One in particular, the strong growth in warehouse automation, continues to flourish due to a...


In particular, the vacancy rate tracked across 210 markets declined to 9.6 percent in the fourth quarter, down by a slight 24 basis points from the previous three months, and a nearly 80-basis-point decline from the same period a year ago.

“With six straight quarters of positive absorption now, warehouses racked up about 110 million square feet of net absorption in 2011, the strongest year since 2008,” says Drummer.

Southern California’s Inland Empire was a bright spot in the recovering industrial real estate market, with more than 12.2 million square feet absorbed in 2011, he says. “That market benefited from a rise in container traffic at the ports of Los Angeles and Long Beach, which posted their highest volumes since before the recession. The Inland Empire saw the top deal of 2011, Hewlett Packard’s lease of 1.4 million square feet in two buildings in San Bernardino.”

Dallas and Atlanta were also leading metros, as expected. “However, in one of the year’s biggest surprises, Detroit, which has suffered economic doldrums for the past decade, logged 6.4 million square feet of net absorption as the auto industry and other Midwest manufacturing has recovered, the fourth-highest total among metros for 2011,” states Drummer.

A senior economist at CoStar explains that large deals are being generated by consumer goods companies, third-party logistics firms, and online retailers that are driving “large takedowns of space,” such as Amazon, which acquired space in Phoenix, Indianapolis, Philadelphia, Seattle, and Nashville totaling more than 3.5 million square feet. Furthermore, Amazon, and other companies, is in negotiations to establish two more DCs, each 1.2 million square feet, in New Jersey.

And it needs the space, considering that it sold one million Kindles every week this past December, helping the company achieve its most successful shopping season in history.

Not only is e-commerce continuing to drive sales—and real estate acquisitions—for Amazon, the world’s largest online retailer, it’s making a stronger argument for warehouse automation in order to keep pace with online sales, which is forecasted to keep on growing.

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