E-commerce fulfillment growth into secondary markets driving up warehouse labor costs, report says

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Surge in labor-intensive facility development having ripple effect nationwide, JLL says. The penetration of e-commerce fulfillment services beyond first-tier property-leasing markets into the so-called secondary region of the Midwest is driving up labor costs and causing worker shortages in traditional and e-commerce distribution centers, a report from real estate and logistics services firm JLL Inc. said today. The findings underscore arguably the most profound change wrought by the e-commerce phenomenon on the nation’s logistics network: The strains being placed on labor availability and across-the-board costs due to exploding demand for massive facilities that require significant worker counts to handle surging product throughput. Dearer rents are pushing e-tailers, omnichannel retailers, and their logistics partners out of primary markets such as Dallas/Fort Worth, southern California’s “Inland Empire” east of Los Angeles, and the New York-New Jersey-central Pennsylvania corridor. Increasingly, they have turned to Midwest markets with lower costs, abundant land, and good access to the national road network, the report said. Indianapolis; Columbus, Ohio; Cincinnati; and St. Louis have seen spikes in e-commerce deals over the past two years, and each market ranks in the top 10 nationally of e-commerce locations, JLL said. In Indianapolis, which is near the nation’s population center and intersected by multiple highways, e-commerce has accounted for 61.2 percent of leases of “big-box” buildings of more than 500,000 square feet for the past two years, according to JLL. Even though these facilities are heavily automated, they still require enormous investments in labor, especially during seasonal spikes, JLL said. Large-scale e-fulfillment operations typically have one employee per 700 to 1,000 square feet. In contrast, traditional warehouse facilities that replenish retail stores and distribute wholesale goods have an average employee count of one per 1,500-3,000 square feet, according to the report. “As a result, e-commerce-focused leasing can drive local […]