2018 Hottest U.S. Fulfillment Markets: PhoenixE-commerce fuels expansion of U.S. fulfillment warehouse markets
Status of U.S. e-commerce fulfillment warehouse markets
During the start of the e-commerce ramp up, the heaviest activity with respect to industrial real estate facilities involved in fulfillment warehouse and distribution operations occurred in major metropolitan areas including Dallas-Fort Worth, central Pennsylvania and Inland Empire. As primary U.S. fulfillment markets reached capacity warehouse occupancy rates, e-commerce, traditional and omnichannel retailers moved their businesses to secondary markets. Rent increases, land prices escalation and decreases in the availability of land, have made primary markets unaffordable. Those factors in combination with labor cost and availability are the typical determining factors in which markets are selected.
With primary markets saturated, e-commerce omnichannel and traditional retailers and their logistics partners are turning inland to markets such as Indianapolis, St. Louis, Phoenix and Salt Lake City to sate their appetite for large scale “big box” warehouse and distribution center facilities and the human workforce that powers them.
From 2010 to 2016, 13.7 billion cubic feet of warehouse space was built in the United States.
Here is a brief look at one of the hottest secondary fulfillment markets in the United States: Phoenix, Arizona.
What factors make Phoenix a top fulfillment market?
- In the top 10 U.S. largest markets for warehouse space
- Since 2010, Phoenix has added over 313 million cubic feet of warehouse space
- Lower costs among major markets in National Construction Cost Index
- Operating costs approximately 40% lower than California
- Third largest labor pool in the Western U.S. for warehouse workers
- Among the lowest costs of labor in the Western U.S.
- No inventory tax
- Reduced potential for labor-related problems since Arizona is a right to work state
- Can reach all of Southern California with next-day freight service
Popular online pet retailer Chewy received $910,000 in incentives from Phoenix area distribution center in Goodyear, Arizona. Phoenix-based pet retailer Petsmart acquired Chewy Inc for $3.35 billion in the largest e-commerce acquisition to date, larger than Walmart’s purchase of Jet.com. Started in 2011, Chewy was originally headquartered in Fort Lauderdale, Florida.
Chewy executives selected the Phoenix area location due to its excellent geographic location and capability of reaching customers in key markets around the world and ability to attract area talent. Chewy executives also favored Phoenix for being a business-friendly community that has been successful in attracting innovative high growth companies to the area.
New Phoenix-area cold storage warehouse boom. Currently Phoenix cold storage warehouse space spans 8.4 million square feet, with only a 1.5 percent vacancy rate. Metro Phoenix has a very limited supply of cold storage warehouse space currently available. This has led to more companies purchasing land and building their own refrigerated warehouse facilities.
The 400,000 square foot warehouse in Goodyear Arizona is the first distribution center in the United States to earn LEED-Platinum certification from the U.S. Green Building Council and achieve Net Zero energy status. The REI distribution center has attracted worldwide interest for its achievements in sustainable logistics operations.
REI uses automation, not to replace human workers but in supplement to its human staff. Many of REI’s processes are not suitable for automation. The Goodyear distribution center employs 180-250 employees throughout the year and has a special need for six highly trained mechanics to maintain the automated systems.
Can having a fulfillment warehouse or distribution center in Phoenix help consumers in Los Angeles? You bet. Pick and pack fulfillment warehousing is booming in secondary markets across the United States. Fulfillment centers near inland ports are especially popular today and their popularity is impacted by land cost and availability, labor, lack of inventory tax and other factors.
Today consumers expect same day or next day delivery. Time is of the essence. Inventory storage locations must be readily accessible via multiple transport modes. Having a warehouse network,
Phoenix gets high marks for having no inventory tax, 40 percent lower operating costs than California and the third largest labor pool in the Western United States for warehouse workers. Its success as
From the supply chain to the shopping cart, Phoenix has proven it will be rolling along as one of the hottest fulfillment markets in the U.S. for the considerable future.
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