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April 10, 2017 11:00 AM, EDT

E-fulfillment Warehouses Growing Not Just Wider But Higher

Victor J. Blue/Bloomberg News

The growth in e-commerce has increased demand for bigger warehouses to fulfill orders, storage space that isn’t only larger in square footage but also height, according to a report from commercial realtor CBRE Group Inc.

In the 1960s, the average height of a warehouse was 24 feet; now it’s 33 feet. In some cases, e-commerce companies are looking for property with 40-foot-high ceilings with two mezzanine levels, not traditionally counted in the square-footage measurement.

“Growing vertically increases the volume you can fit into the space,” said David Egan, CBRE head of industrial and logistics research in the Americas. “Since e-commerce has rapidly moving inventory, being able to effectively use the entire cube of the warehouse helps the efficiency of the operations.”

CBRE data show that 13.7 billion cubic feet of warehouse space has been built between 2010 and 2016, 65% of which is in the 10 largest markets such as California’s Inland Empire, Dallas/Fort Worth, Chicago and Atlanta. One of the fastest-growing areas to build warehousing is Allentown in Lehigh County, Pa., according to CBRE.

“There is a lot growth in eastern and central Pennsylvania, which is really meant to service New Jersey and New York, because of the land issue. It’s really hard to find the space anywhere in New Jersey to build a 1 million-square-foot-plus massive warehouse, but there is plenty of land in Lehigh Valley that is close enough to the populations in that market,” Egan said.

E-commerce purchases increased 25% in 2016 versus a 6% decline in brick and mortal retail business, according to the Commerce Department.

A PricewaterhouseCoopers-Urban Land Institute study in 2016 found that e-commerce businesses require as much as three times more warehousing space than traditional retailers based on product selections. For example, Amazon owns more than 150 warehouses with a total of 100 million square feet and plans to add 36 warehouses this year, according to company data. Amazon’s warehousing footprint would put it at No. 3 among top warehousing firms among 3PLs, according to Armstrong & Associates Inc.