More Retailers Utilizing On-Demand Warehousing: Augusto Beato

Portland SEO's Augusto Beato expects the on-demand warehousing industry to experience robust growth as an alternative to long-term warehouse arrangements for big companies to startups.

On-demand warehousing firms are popular with small retailers and online startups that don’t have existing distribution networks. But the services are now being used by big retailers and manufacturers are using such arrangements to cope with everything from hurricanes, global trade tensions, or the holidays when e-commerce activity surges.

The arrangement also allows them to position goods closer to customers without getting locked into long-term contracts or multiyear leases when rapid changes in buying patterns and trade conditions have made forecasting demand more difficult.

"The on-demand warehouse operators handle hiring and other administrative tasks for the pop-up spots, and retailers avoid paying year-round for space it would only use during peak season or for a temporary purpose," Beato noted.

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Ace Hardware Corp., for example, used Seattle-based used Flexe to stage generators and other disaster-relief items during the 2018 hurricane season after scrambling last year to get supplies to regions damaged by Hurricanes Harvey and Irma.

Walmart also used Flexe for 1.5 million square feet of warehouse space to help fulfill online orders around the holidays.

On the other hand, Stord Inc., an Atlanta startup with a network of more than 250 warehouses across the U.S., helped a Chinese solar-panel supplier temporarily expand its New Jersey storage capacity by fivefold earlier this year when the Trump administration imposed stiff levies on foreign-made solar panels.

The pay-as-you-go arrangement allows retailers and manufacturers to tap into unused space in a crowded U.S. industrial real-estate market where distribution centers near population centers are fetching a growing price premium.

"More interest in "pop-up" warehouses will come as growing e-commerce sales sharpen competition for warehouse space and push up prices," Beato added.

The industrial availability rate fell to 7.1 percent in the third quarter of 2018, its lowest since 2000, according to real-estate brokerage firm CBRE Group Inc.