New Research Shows that Rising Warehouse Labor Cost is Driving Investment in Automation
ITS Logistics today released the Q2 ITS Logistics US Distribution and Fulfillment Index, Powered by Cresa. This quarter, the index reveals that the National Industrial Real Estate Vacancy Rate eclipsed 6.2%, which is up from 5.7% in Q1. There is also more warehouse space available on the market right now than at any time since the 2020 onset of the pandemic, and rising warehouse wages are driving the demand for technology and automation to reduce labor costs.
“Wages have increased to a regional average of $18.99, which is around a 40-50 percent increase in the last five years. It was not long ago that a starting warehouse employee made $12 to $14 per hour on the high end,” said Ryan Martin, President of Assets for ITS Logistics. “As increasing wages put pressure on employers, the demand for technology and automation to reduce labor costs in warehouse operations is also increasing.”
According to a recent Gartner report, warehouse automation has become an essential aspect of modern logistics operations. The capacity of the global warehouse automation market continues to expand as options for automation evolve, which results in a beneficial outcome for both productivity and labor. By 2032, the market is expected to reach $71.01 billion at a compound annual growth rate (CAGR) of 15.91% during the forecast period 2023 to 2032. Of all the regions, Asia/Pacific is expected to grow the fastest.
As noted in this quarter’s index, while warehouse automation continues to evolve, rising wages indicate employers are competing for talent in specific regions due to inflationary pressures. Federal and state incentives are also driving manufacturing to key areas, increasing competition for higher-paying jobs and pressuring general warehouse positions. In Reno, Los Angeles, and Chicago, average wage rates rose to $18.99, outpacing the Consumer Price Index (CPI) in most regions, with some areas seeing even higher increases.
According to the National Retail Federation’s (NRF) 2024 June Monthly Economic Review, while the economy is growing, inflation is moderating as consumer spending is currently supporting underlying momentum. The NRF review revealed that the remainder of this year will depend on several factors but will primarily depend on the pace of inflation, job growth, and pending decisions made by the Federal Reserve. In addition, the Consumer Sentiment issued by the University of Michigan’s Index rose to 79.4 in March of this year.
“The Consumer Sentiment is currently up 28.1% from March 2023 and up 13.92% from December 2023,” continued Martin. “This is a highly encouraging indicator for businesses. Overall, retail sales were also up 0.7% in March, seasonally adjusted from February, and up 4% unadjusted year over year. This growth includes services but is also directly impacting retailers in a positive manner.”
ITS Logistics offers a full suite of network transportation solutions across North America and omnichannel distribution and fulfillment services to 96% of the U.S. population within two days. These services include drayage and intermodal in 22 coastal ports and 30 rail ramps, a full suite of asset and asset-lite transportation solutions, omnichannel distribution and fulfillment, and outbound small parcel.
The ITS Logistics US Distribution and Fulfillment Index tracks the Producer Price Index (PPI) for Warehousing and Storage and offers a regional markets overview to optimize warehousing and delivery costs. All major markets in the US are highlighted each quarter via the Index. Visit here for a full, comprehensive copy of the index with expected forecasts for the US distribution and fulfillment sector of the supply chain industry.
Additional Resources:
- Gartner “Avoid These Pitfalls in Large-Scale Warehouse Automations” Abdil Tunca, Dwight Klappich, Rishabh Narang; 28 February 2024
