Global Warehousing Industry Outlook

  • The global warehousing market was valued at approximately $1.9 trillion in 2018 and is expected to grow at a CAGR of around 6-8 percent to around $1.9 trillion by the end of 2019
  • Regions, such as Europe and North America and some parts of APAC, including Australia and Singapore, have high market maturity due to tight supply conditions and higher technology adoption
  • Parts of APAC, such as India and China, are expected to be the future growth driving markets for the warehousing industry owing to the forecasted increase in manufacturing facilities, high number of top container ports and due to the expected robust growth in the e-commerce sector, which is expected to grow from $1.7 trillion in 2017 to $1.8 trillion in 2018

warehousing-global-market-size

Brexit - Impact on Warehousing

Rise in warehouse operating cost

Impact Area: Warehouses operating in the UK

  • Post the exit from the EU, the UK is expected to see a rise in wage rates. The rise in wage rates was a major social plank during the referendum
  • A mandatory wage rise will impact labor costs, which account for close to 40-60 percent of the total warehouse costs
  • Any rise in wage rates would directly impact the warehouse costs, which could in turn lead to a rise in prices

Action Item:

  • Clients need to look at price absorption clauses to shield them from any potential rise in prices

Impact on Distribution Centers

Impact Area: Distribution centers in the UK and Europe

  • UK has comparatively high rental rates coupled with a less strategic location in Europe. Hence its location attractiveness for centralized European Distribution Centers (EDC) will reduce in the near future
  • Companies that currently have Centralized European Distribution Centers (EDC) in European Union will have a minimal impact due to the BREXIT as most of them are located across countries like Germany, France and Benelux

Global Warehouse Market Maturity

  • Europe and North America show higher service provider maturity due to high technology adoption levels and a wider range of services offered. Emerging countries, such as Brazil, India, China and Japan, show low to medium maturity due to lower 3PL penetration rates and lower adoption of warehouse technology

Global Warehousing Industry Trends

  • Adoption of technology in warehouse management functions, such as AGV, pick to light and voice directed picking, is emerging, as most warehouse occupiers are accommodating their distribution centres (DC) towards faster response times and space-saving, efficient systems with minimal labor requirements
  • Increasing service levels, such as same-day delivery and e-commerce, are leading retailers to invest more in warehouse space
  • Adoption and shift towards centralized distribution model results in an increased demand scenario for modern Class A warehouses across the globe
  • Currently, warehouse service providers are offering value-added services, such as labelling, packaging and palletizing, to enhance and compliment service offerings

Warehousing Drivers and Constraints

Drivers 

Economy:

  • Global manufacturing production rose almost 2.4 percent in 2016, and it is expected that manufacturing will pick up pace and grow in the remaining months of this year, leading to more demand for warehousing facilities
  • The GDP is set to grow by approximately by 3.5 percent in 2016 and 3.8 percent in 2017, thus, creating a positive economic environment, leading to an increase in demand for warehouses

Growing Retail and E-commerce Industry:

  • The growth of e-commerce has lead to an increase in demand of warehouse space from 3PLs across the globe and will grow at a faster pace in emerging economies, such as India and China.
  • The expansion of retail chains and their dynamic growth is expected to push the demand for warehouses in the upcoming years
  • Disposable income, growing at 2.3 percent among the general public, has been creating demand for consumer goods along with increased imports and exports. The growth of retail and FMCG goods has been the main driver for the industrial warehouse industry

Constraints 

  • Across emerging regions, the availability of Class A warehouses is limited to only a few countries, such as India and China. Hence, it hinders the adoption of higher technology levels as well as best-in-class KPIs
  • The unavailability of skilled labor in regions such as North America and Europe, along with less expertise in the warehousing field, keeps wages relatively high, which impacts overall operating costs