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How COVID-19 Has Impacted Logistics Operators

Logistics network update on warehousing and fulfillment: More than half of logistics providers say COVID-19 has negatively impacted business

The pandemic has exposed to the world how critical the movement of goods really is and what happens when global supply chains are disrupted. Even now, the ongoing uncertainties of COVID-19 have left many guessing.

FLEXE recently conducted a survey to logistics providers inquiring how COVID-19 has affected utilization rates, and what providers are doing to mitigate future disruptions.

Image of 2020 FLEXE infographic Supply Survey Logistics Update final 1

It’s going to be awhile

According to respondents, 37% said they aren’t clear on how long the impacts of COVID will endure. Of those that speculated, 33% said the duration would last for the next 10-12 months, and 22% said impacts would last even longer.

The top 3 initiatives to mitigate disruption*:

  1. 66% said they were putting a contingency plan in place to manage a second wave of COVID-19
  2. 53% are investing in eCommerce fulfillment capabilities
  3. 50% are investing in adding or expanding new sales channels

*Responses with “none of the above” have been removed

Sales and new project opportunities have taken a hit

The majority of respondents say the impact of COVID-19 has been negative, resulting in delayed or cancelled projects, lower project volumes, and fewer new project opportunities.

  • 53% of respondents said COVID-19 has had a negative impact on business
  • ⅓ say projects have been cancelled or delayed
  • 25% say project volumes and number of new projects have decreased

Only 29% say the impact has been positive, 30% of which say new projects have increased and 23% saying project volumes have increased.

The labor market is competitive

65% say that the shortage in the labor market has impacted business and 56% believe shortages have increased.

In terms of wages, 59% believe wages are getting more competitive and more than half (52%) believe that will persist after the pandemic.

To compete, 47% are increasing wages for warehouse workers.

The majority of respondents that agree wages are getting more competitive are located in the northeast and southwest regions of the U.S., both of which correlate with industrial vacancy rates and the most popular markets searched within the FLEXE Operator Network (below).

Capacity is limited

U.S. average vacancy rates remain below 6% and every major market is under 10%

Lowest available inventory in major markets

  • NYC 2.1%
  • New Jersey 2.5%
  • Orange County 3.1%
  • Nashville 3.2%
  • Los Angeles 3.6%

Highest available inventory in major markets

  • Baltimore 9.7%
  • Charleston 9.6%
  • Orlando 9%
  • Houston 8.8%
  • Jacksonville 8.5%

Average rent: $6.30 per square foot, with no change from Q1

New construction: 78.5 million square feet was delivered in Q2 2020

Available capacity exists, but it varies.

  • 42% of respondents said they are operating above 81%
  • 35% indicated they are operating between 61-80%
  • 23% are operating below 60% utilization

FLEXE marketplace data

The FLEXE Operator Network consists of warehouse operators that have available capacity that is not publicly listed as available to lease, which provides access to an untapped market of underutilized capacity. With more than 1,500 warehouses in the FLEXE network, capacity and services are available in every major market across the U.S. and Canada.

Since March 2020, FLEXE Fulfillment Programs have supported a 60% increase in order volumes and marketplace data shows that the following regions are the most popular for warehousing and fulfillment centers.

Top 5 most searched regions in the FLEXE Operator Network:

  1. Los Angeles, California
  2. New York / New Jersey metro areas
  3. Chicago, Illinois
  4. Atlanta, Georgia
  5. Birmingham, Alabama

Top 5 U.S. markets for live FLEXE projects:

  1. California
  2. Texas
  3. Pennsylvania
  4. Illinois
  5. Georgia

In conclusion

COVID-19 has fundamentally disrupted the retail and supply chain industries. It’s still unclear what the “new normal” will be, but it’s no secret we won’t be going back to the way things were.

ONGOING IMPLICATIONS:

  • The impacts of COVID-19 on logistics providers will persist well into 2021
  • Businesses face major constraints in both labor and capacity
  • Existing capacity is tight across the industry, but some is underutilized in the market