Global warehouse, fulfillment construction seen waning

In response to the rising trend toward online shopping and e-commerce during the pandemic, the consultancy saw an increase in the construction of fulfillment centers to cope with this demand. Amazon accounted for a large proportion of this activity, as it doubled its fulfillment capacity between 2020 and 2021. 

But as the trend toward e-commerce begins to slow down, the construction of new fulfillment centers has also dipped. In 2022, 4,000 fulfillment centers were added to the global building stock. This is forecast to be cut in half this year.

“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,” the report said.

The U.S. economy will decline over the next 12-18 months, that could lead to a knock-on effect on global warehouse construction over the next few years, according to the report. 

However, 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 in construction is expected in the second half of this year and the first half of 2024, the report said.

Overall, almost 10,000 warehouses were added to the building stock in 2022. 

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

Rueben Scriven, research manager at Interact Analysis, echoed many experts’ thoughts when saying that the construction downturn is due to lack of demand. “Rather, it is due to high interest rates and poor economic conditions,” he said. “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.”