Industrial Labor Market to Squeeze Even Tighter

CHICAGO—Finding quality labor for a new warehouse has become difficult for many firms, and the task of staffing a facility is likely to get even more challenging in the years ahead. Only about 9% of all retail sales are completed using e-commerce, and that portion is expected to rise precipitously for at least another decade. And even though distribution centers are utilizing more robotics and other high-tech tools, the low unemployment rate means its getting hard to find the right people to run such operations.

“There definitely is a skilled-labor shortage,” Adam Marshall, a Chicago-based senior managing director of Newmark Knight Frank, tells GlobeSt.com. “Finding people with the right professional and technical competence is not easy.”

The stupendous growth in warehousing and logistics work was recently matched by a bloodbath in the retail sector as e-commerce undermined brick-and-mortar stores. According to a November 3 report from the US Bureau of Labor Statistics, retail jobs reached a peak in January 2017, and then hemorrhaged more than 100,000 jobs by the end of October. Retail jobs started to grow again this year, especially ones for goods rarely sold over the internet, but transportation and warehousing growth has accelerated, averaging more than 15,000 new jobs per month, compared with around 11,000 per month in 2017.

And according to Marshall, the labor market is set to squeeze even tighter. He says BLS statistics show more than 25% of the supply-chain workforce is at or beyond retirement age.

As a result, developing new distribution facilities is no longer just a matter of finding an adequate land site, settling on a price and putting up walls. “If you’re a large distributor or a 3PL provider,” Marshall says, “you’re paying close attention to who is in the neighborhood.”

That usually means Amazon. The e-commerce giant has grown so much, and can soak up so many available employees, some providers have become leery of occupying nearby buildings. “They are clearly ahead of all other competitors,” Marshall says, especially in terms of the sophistication of its operations and understanding how to staff up complex distribution centers.

In the last 18 months, Amazon has completed about five million square feet of space in the Chicago region alone. That kind of pace is just one of the reasons some say every company needs an “Amazon strategy.”

But one size will not fit all, Marshall adds. Not every firm wants distance from Amazon. Uline, for example, has expanded alongside Amazon’s operation in Southeast WI, which is part of the Chicago metro region. “Being close to Amazon is critical” for the Pleasant Prairie, WI-based boxing and shipping supplier, and it has taken around two million square feet in this submarket, greatly intensifying the need for labor. “The Southeast WI population wasn’t very large to begin with.”

And as the portion of the economy dedicated to distribution increases, he says, “in some cases operators are going to need to increase wages.”