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As imports boom, warehouses fill up, and businesses face a storage shortage

Justin Ho Oct 1, 2020
Heard on:
Warehouse rents in Southern California are up roughly 10% compared to a year ago. Virginie Goubier/AFP via Getty Images

As imports boom, warehouses fill up, and businesses face a storage shortage

Justin Ho Oct 1, 2020
Heard on:
Warehouse rents in Southern California are up roughly 10% compared to a year ago. Virginie Goubier/AFP via Getty Images

Online shopping has been booming in this COVID-19 economy. And ever since international shipping restarted, that has caused imports to skyrocket.

The ports of Los Angeles and Long Beach — the busiest port complex in the U.S. — have handled record volumes of imports over the past few months, as businesses work to meet pent-up demand and build up their inventories for the holidays. The surge has been so acute that importers are running out of room in warehouses to store all of those goods.

When products arrive at the ports of Los Angeles and Long Beach, port workers unload them onto trucks or rail cars and those are shipped across the country to distribution centers.

“Let’s say, in the Midwest somewhere, it could be Chicago, Ohio Valley,” said William Villalon, the president of APL Logistics. He said the problem is things haven’t been moving very quickly.

“They’re just being parked because they can’t be taken into the warehouses fast enough,” Villalon said.

Social distancing is slowing down the unloading process. Truck chassis and rail car capacity are in short supply. Warehouses are packed to the rafters.

Available capacity is at its lowest since 2018, said Zac Rogers at Colorado State University. He runs the Logistics Managers’ Index, which tracks supply and demand in the shipping industry.

“COVID-19 has supercharged the warehouse sector because of the increased reliance on e-commerce,” Rogers said.

And with the holidays approaching, Rogers said retailers are competing for whatever storage space they can find.

“That’s really driving up the cost of warehousing, because we don’t have very many warehouses available,” he said.

Warehouse rents in Southern California are up roughly 10% compared to a year ago, according to Jason Tolliver, regional vice president of research at the commercial real estate services firm Cushman & Wakefield.

Retailers are paying that premium and not passing it along to consumers as they head into the holiday season.

“Trying to avoid the worst word that they could possibly hear, which is ‘stock out,'” Tolliver said.

The boom in e-commerce is prompting developers to build more warehouses, especially in urban areas.

“The market appears very healthy, with sufficient levels of demand to really eat up a lot of that space that I think is going to be delivered over the course of this year and next year,” Tolliver said.

The ports themselves are scaling up, too.

Mario Cordero is the executive director of the Port of Long Beach, which has spent roughly $4 billion on infrastructure improvements over the last decade.

“And for the next decade, approximately $2 billion, primarily in rail infrastructure” will be spent, he said.

The idea, Cordero said, is to cut trucks out of the equation, which will move goods faster and be good for the environment.

COVID-19 Economy FAQs

What’s the outlook for vaccine supply?

Chief executives of America’s COVID-19 vaccine makers promised in congressional testimony to deliver the doses promised to the U.S. government by summer. The projections of confidence come after months of supply chain challenges and companies falling short of year-end projections for 2020. What changed? In part, drugmakers that normally compete are now actually helping one another. This has helped solve several supply chain issues, but not all of them.

How has the pandemic changed scientific research?

Over the past year, while some scientists turned their attention to COVID-19 and creating vaccines to fight it, most others had to pause their research — and re-imagine how to do it. Social distancing, limited lab capacity — “It’s less fun, I have to say. Like, for me the big part of the science is discussing the science with other people, getting excited about projects,” said Isabella Rauch, an immunologist at Oregon Health & Science University in Portland. Funding is also a big question for many.

What happened to all of the hazard pay essential workers were getting at the beginning of the pandemic?

Almost a year ago, when the pandemic began, essential workers were hailed as heroes. Back then, many companies gave hazard pay, an extra $2 or so per hour, for coming in to work. That quietly went away for most of them last summer. Without federal action, it’s mostly been up to local governments to create programs and mandates. They’ve helped compensate front-line workers, but they haven’t been perfect. “The solutions are small. They’re piecemeal,” said Molly Kinder at the Brookings Institution’s Metropolitan Policy Program. “You’re seeing these innovative pop-ups because we have failed overall to do something systematically.”

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