DC Velocity - March 2017

newsworthy

Report: E-commerce fulfillment growth driving up
DC labor costs

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, according to a report from real estate and logistics services firm JLL Inc.

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 due to exploding demand for massive facilities that require significant worker counts to handle surging product throughput.

Dearer rents are pushing e-tailers, omnichannel retail-
ers, 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, abun-
dant land, and good access to the national road network,
according to the report, “The effect of e-commerce
fulfillment.” 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 cen-
ter 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-ful-fillment 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 to 3,000 square feet, according to the report.