Why do warehouse costs continue to rise?

After a decade of growth, the global contract logistics market contracted by 3.3% in 2020, as a strong H2 prevented worse outcomes.
This episode of Ti Talks Supply Chains, Ti analysts Nia Hudson and Jenan Hasan share some data from Ti’s brand new Warehouse Tracker. Also this episode some wise words on AI from our Technology Advisor, plus the latest GSCi news.


Here’s an extract from this month’s episode…

What are we seeing right now in regards to warehouse demand and what is your expected outlook for warehousing demand?

Right now, there are several macro-economic indicators pointing towards a situation where warehouse demand is waning – Q1 2023 saw sub-par global trade recovery. Consumer confidence is recovering but it’s still below 100 as of July 2023 according to the OECD, indicating cautious spending habits, and global PMI which tells the direction of market conditions is indicating market decline. Definitely fair to say we’re seeing this situation of normalising demand right now and in the medium term, particularly when compared to the boom that we saw the past several years.

In the longer term, as the global economy continues to recover, inflation is brought under control in key markets. We’d expect to see demand pick back up again, predominantly into 2024

Could you tell us a bit about how the warehousing market differs between regions?

Europe and North America are generally on the same wave length – loosening vacancy and weakening demand. From a cost perspective, they remain elevated in both regions – looking forward, we probably won’t see much change in Europe for the medium term due to still high inflation, however in North America inflation is seemingly under control, and as such growth in operating costs like rent and labour might moderate. Key markets in East Asia seem to have a much wider gap between supply and demand than Europe and North America. As such, we would expect to see limited cost growth or even falling costs in key markets such as Japan and South Korea.

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