We use cookies to provide you with a better experience. By continuing to browse the site you are agreeing to our use of cookies in accordance with our Cookie Policy.
  • INDUSTRY PRESS ROOM
  • SUBMISSIONS
  • MEDIA FILE
  • Create Account
  • Sign In
  • Sign Out
  • My Account
Free Newsletters
  • MAGAZINE
    • Current Issue
    • Archives
    • Digital Edition
    • Subscribe
    • Newsletters
  • STRATEGY
  • GLOBAL
  • LOGISTICS
  • MANUFACTURING
  • PROCUREMENT
  • VIDEO
    • News & Exclusives
    • Viewer Contributed
    • CSCMP EDGE 2023
    • Upload your video
  • PODCAST ETC
    • Podcast
    • White Papers
    • Webcasts
    • Events
    • Blogs
      • Reflections
      • SCQ Forum
    • Mobile Apps
  • MAGAZINE
    • Current Issue
    • Archives
    • Digital Edition
    • Subscribe
    • Newsletters
  • STRATEGY
  • GLOBAL
  • LOGISTICS
  • MANUFACTURING
  • PROCUREMENT
  • VIDEO
    • News & Exclusives
    • Viewer Contributed
    • CSCMP EDGE 2023
    • Upload your video
  • PODCAST ETC
    • Podcast
    • White Papers
    • Webcasts
    • Events
    • Blogs
      • Reflections
      • SCQ Forum
    • Mobile Apps
Home » Increase in warehouse, DC labor costs has ripple effect on rental rates, CBRE study finds
Forward Thinking

Increase in warehouse, DC labor costs has ripple effect on rental rates, CBRE study finds

March 23, 2016
Supply Chain Quarterly Staff
No Comments

A $1-per-hour wage increase for the typical U.S. warehouse and distribution center employee would be equal to jacking up the annual rent on a 500,000-square-foot industrial property by about 37 percent, according to a report issued today by real estate services giant CBRE Group Inc.

The report found that a $1-an-hour rise in wages would add about $1 million in annual labor costs for a 500-employee facility. That added cost is equivalent to a $2.08-per-square-foot rent increase for a large building, according to the report. The average U.S. industrial rent is about $5.65 per square foot, the report said.

The average wage for a warehouse and DC worker is $11.82 an hour, according to CBRE, citing data from Economic Research Institute Inc. There has been speculation in recent years that businesses will be facing a chronically acute shortage of labor—especially e-commerce firms, which have experienced tremendous growth and whose fulfillment centers normally employ twice as many workers as do typical warehouses and DCs. (That figure spikes to four times normal during the peak holiday period.) In response, many businesses have turned to automated solutions, notably robotics, to drive throughput with a static number of workers. Labor accounts for about 20 percent of a company's supply chain expenses, CBRE reckons.

Not surprisingly, under the CBRE scenario, e-commerce firms—which are more likely than traditional merchants to operate big-box DCs and hire a lot more people—would take the biggest hit from the impact of a wage hike.

The current federal minimum wage is $7.25 an hour. Spurred by increasing concerns over income inequality, minimum wage increases went into effect at the beginning of the year in 17 states and the District of Columbia. San Francisco, Seattle, and Los Angeles have passed laws mandating that their minimum wage be gradually increased to $15 an hour during the 2018-to-2020 time frame.

In already-tight labor markets, the push toward a markedly higher minimum wage could result in wage increases that move up the pay scale, possibly driving up warehouse and DC wages even further, CBRE said.

Though some companies may pass on the higher labor costs to customers, many businesses worried about losing customers may choose to eat the increases. Besides investing in more automation, firms not tied to a specific location could relocate to areas with lower minimum wage requirements, according to the report.

To some extent, however, a firm looking to relocate to a region with more land at affordable prices may find its hands are tied. David J. Egan, Americas head of industrial research for CBRE, noted that large e-commerce firms need access to an abundant labor pool, which is generally available only in densely populated urban areas, where property costs are higher. "In a perfect world, many of these facilities would be located a little further out, where land is more plentiful and cheaper, but the labor limitations in those locations are a big problem and (are) often a deal breaker," Egan said in an e-mail.

    • Related Articles

      Average size of U.S. warehouses has doubled since 2002, CBRE report finds

      Reverse logistics could spark surge in warehouse, DC demand, CBRE report says

      Businesses struggle with shortage of skilled labor, study finds

    Recent Articles by Supply Chain Quarterly Staff

    Artificial intelligence could solve problems in physical operations in 2024

    Prologis reaches halfway mark of generating 1 gigawatt of solar power by 2025

    Yusen rolls out robotic trailer unloader from Pickle Robot Co.

    You must login or register in order to post a comment.

    Report Abusive Comment

    Most Popular Articles

    • Walmart to open fifth “next-gen” fulfillment center in 2026

    • 53% of procurement leaders expect to increase their spending in 2024

    • U.S. faces permanent labor shortage, says University of Tennessee economist

    • Pepsi exec highlights four key structural changes in the supply chain

    • What skills will you need in the Age of AI?

    Featured Video

    Edge2023 innovationtheater here technologies

    CSCMP EDGE 2023 Innovation Theater: Enabling Peak Performance in Last-Mile Delivery Through Private Mapping and Custom Routing - HERE Technologies

    CSCMP EDGE 2023
    At HERE Technologies, we understand the hypercompetitive world of e-commerce, retail, and parcel delivery is increasing in complexity every day. End customers demand ever-increasing delivery performance levels regarding on-time arrivals, flexibility in delivery schedules, pricing and payment options, and more....

    FEATURED WHITE PAPERS

    • Balancing Act: How Freight Brokers Help Shippers Navigate Uncertainty

    • Quarterly Freight Data Report: Q3 2023

    • A Brighter Future: How COVID-19 Continues to Change Freight Procurement Strategies for the Better

    • Five questions to ask before electrifying your indoor forklift fleet

    View More

    Subscribe to Supply Chain Quarterly

    Get Your Subscription
    • SUBSCRIBE
    • E-NEWSLETTERS
    • ADVERTISING
    • CUSTOMER CARE
    • CONTACT
    • ABOUT
    • STAFF
    • PRIVACY POLICY

    Copyright ©2023. All Rights ReservedDesign, CMS, Hosting & Web Development :: ePublishing