WAREHOUSE CONSTRUCTION IS INCREASING IN TEXAS AND CALIFORNIA - HERE'S WHY

LOCAL LOOK – WHAT THIS MEANS FOR YOU

2020 has brought a significant amount of change: change to the way we interact with each other, our families and friends, and especially the way we conduct retail transactions.

It’s safe to say that e-commerce is booming in 2020. And, this trend is showing no signs of slowing down anytime soon. A result of this boom is increased demand for warehousing space, demand that is being met by the steel building industry.

It’s safe to say that e-commerce has completely revolutionized the way people are getting their consumer goods. Everything from Apple products to groceries are now being purchased online at a staggering rate.

By most estimations, 2020 will be the year that e-commerce truly hits its stride. Many projections are pointing to this year as being the time when the number of digital buyers throughout the world will eclipse two billion, roughly equating to 27% of the total global population.

This unprecedented surge of growth in online retailing has presented challenges for many commercial retailers who now need more room to store their inventory. And, we’re not just talking about heavy hitters like Amazon or Alibaba. National brands throughout the country are having to retool their logistics in light of the new e-commerce paradigm, and there’s one common thread to be found throughout all of this development: breaking ground on new construction of steel-built warehouses.

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Where the Warehouses Are Popping Up Most

When you think about how the United States manages international shipments of bulk consumer goods, two states should come to mind: California and Texas.

But why?

It’s not just the fact that both California and Texas are major destinations for international freight shipments. These states are gateways to other markets throughout the country, and they also happen to have massive markets within them, as well.

The reasons why California and Texas represent such a large share of new warehousing construction also has to do with the following factors:

Population Density. Wherever there are more people, there’s going to be easier last-mile shipments to be made by e-commerce retailers. The vast majority of the new warehouse construction markets that are leading the industry are located smack-dab in the center of densely populated cities. Los Angeles is one of them. Houston is another.
Existing warehouse vacancy rates. One of the best indicators of new warehouse construction is going to be existing warehouse vacancy rates. The lower the vacancy rate, the higher the demand is going to be for new warehouse square footage. Here again, California and Texas both have warehouse vacancy rates that are at or below 4.5%.
Cost for new construction. Obviously, it’s going to cost less to build a warehouse in an industrial area of inland California than it would be to build an equitably sized building in downtown New York City. The state governments of California and Texas are, generally speaking, very receptive to business development initiatives, which is why more and more investments are being made into new warehouse construction in these states.

Capital Steel Two Story Warehouse Building

The Role of Steel in the Boom

When a shipping, freight, inventorying, or logistics company is considering the best alternatives for the construction of new warehouse space, steel-framed buildings are consistently at the top of the list.

The reasons are numerous. Some of them include:

Larger overall building dimensions
More support-free interior spans (up to 200’ or more in some cases), allowing for better use of square footage
Faster construction timelines (up to 40% faster compared with traditional building types)
Easier permitting and zoning
Lower ongoing costs of maintenance
Lower building insurance costs

Capital Steel Warehouse Building

It’s worth mentioning that steel-framed buildings are normally more expensive than wood-framed buildings, as the cost of manufacturing industrial-grade steel is inherently higher than it is for wood. In fact, there is no other framing type that even holds a candle to the structural integrity and modular capability of steel, a feature that often justifies the higher initial building cost.

But, because the building can be erected within a much shorter timeline and with more bespoke floor plans and sizes, it winds up being the winner for profit-savvy decision makers.

While no one has a crystal ball, we can be somewhat confident that the trend we’re seeing in new warehouse construction in California, Texas, and other parts of the US is going to continue. In preparation, Capital Steel Industries is working closely with our contractor partners to ensure that the best steel building contractors are matched with the individuals and businesses who need their services the most.

Here’s to a fruitful 2020 and beyond.

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