Distribution Industry Confronts Growing Labor Shortage

Facility design and end-user requirements aren’t the only aspects of industrial real estate that are undergoing evolution. There’s also the human factor: the labor requirements for an industrial facility, which are changing rapidly along with everything else. Connect Media asked James Breeze, director of industrial research for Colliers International, to bring our readers up to date on this subject.

Q: What factors need to be weighed when looking at the labor pool for an industrial/logistics facility in 2019?

A: Growing labor shortages represents a key challenge ahead for the distribution industry. The U.S. unemployment rate hovers near a 50-year low. With industrial-related hiring already at all-time highs, the insatiable need for labor to service growing e-commerce demands, combined with an economy at nearly full employment, is exacerbating the labor shortage for distribution workers in many markets. Thus, occupiers and developers alike will deploy a number of strategies to attract the workers required in supply chain optimization.

One obvious way to do this will be to raise hourly wages. While hourly wages have not increased significantly overall, rising in the U.S. only 3.1% year-over-year according to the Bureau of Labor Statistics, hourly rates for warehouse labor have increased 6.7% to $13.97 per hour since 2017. While increasing wages can hurt the bottom line, it will be necessary to entice labor from the retail or food services industries, a target labor pool for distribution occupiers, to consider warehouse work.

Another tactic to attract labor is to offer more amenities and benefits. Distribution centers throughout the country are starting to look more like a creative office space, with break rooms including couches, ping pong tables and basketball courts. Other perks include daycare for children. Companies are recognizing that in order to attract and retain talent, both in the warehouse and in corporate America, they must entice the millennial and Generation Z crowds. These groups as a whole are more likely to work for a brand that they admire, even in distribution capacities. Developers will take notice of this trend, offering these build-outs as part of tenant improvement packages.

Q: How have these changed compared to a decade ago? What skills are called for today that weren’t a factor in 2009?

A: No matter how creative companies become in attracting and retaining talent, automation can reduce pressure placed on labor. By introducing automation into distribution centers, companies increase human efficiency by reducing the time it takes to complete any task, as well as decrease the need for additional labor to accommodate demand, particularly seasonal demand.

Reliance on automation will continue to increase, as labor remains scarce and technology continues to advance. Human workers will need to work hand-in-hand with this new technology, so training will be required. While some of this training is provided by the company itself, to get a head start, many career and junior colleges are now offering certificates in logistics and warehousing which includes certification in warehouse technology. Regions that produce a significant amount of trained labor for automation will thrive in the coming years.

Q: What job functions have emerged over the past decade with the advent of e-commerce?

A: Warehouse work is no longer just about lifting heavy boxes and driving large pallets on a fork lift. With e-commerce, order picking has become a primary function in a distribution center. This makes warehouses more labor intensive, but also opens up warehouse work to a wider range of people who no longer have to drive a fork lift or lift heavy boxes to work in the industry.

Q: Where are the best markets to find labor, and are these necessarily the best markets for industrial development?

A: The best markets to find industrial labor are in areas with general population growth. The regions with the most population growth are in the Southeast and Western U.S., which opens up the potential labor pool. Not coincidentally, these two regions have posted the most positive absorption for industrial real estate over the past five years. The Southeast U.S. is projected to have the highest rate of population growth over the next five years, and will be the region that creates the most industrial real estate demand. While Atlanta will remain the core industrial market of the Southeast U.S., emerging markets in the region will thrive because of available labor, including Savannah, GA, Greenville, SC and the I-4 Corridor in Central Florida.

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